Tax underpayment (advice appreciated)

yomamma

Hi

I received an end of year statement online for 2018 saying that I have an underpayment of 396 euro on PAYE for the year.

It says in result the amount will be collected by reducing my tax credits in future years until full amount (396 euro) is collected. (It says I have 1650 euro tax credits)

It also says any future refunds that i am entitled to will be deducted against this underpayment until it is fully collected (I am due 128 euro medical expenses refund)

I am not sure how all this will work out and has me worried.

Will I receive my medical expense refund?
Will I be taxed more on my next payslip?

I am in fear that I am going to be taxed a large sum on my next pay to balance this all off!!!

Thanks for all advice in advance.

The J Stands for Jay

The reduction in tax credits will be spread over the full year, so it won't be too bad a reduction in your net pay. You won't get the refund, but it will reduce the amount you owe which will them reduce the reduction in your tax credits and slightly increase your net pay for the rest of the year

yomamma

McGaggs wrote: »

The reduction in tax credits will be spread over the full year, so it won't be too bad a reduction in your net pay. You won't get the refund, but it will reduce the amount you owe which will them reduce the reduction in your tax credits and slightly increase your net pay for the rest of the year

Hi, Thanks for reply,

Ok, so what i gather is my net pay will be reduced from now on but not by a high %? I was just afraid that they will take all that was owed out of my next pay.

In regards to tax credits. I have 1650 euro tax credits. Why cant they just take all amount owed from my tax credits and everything then stays the same? Because its tax CREDIT why cant this happen.. Sorry if that a stupid question. It all double dutch to me .

srsly78

This does happen exactly as you say, it's very simple.

1650 - 396 = 1254 credits, spread over 12 months

Basically you will get 396/12 = e33 less per month.

Stanford

Your tax credit is spread over the year so your new yearly tax credit will be (€1650 - €396)/12 = €104.50 per month

relax carry on

yomamma wrote: »

Hi, Thanks for reply,

Ok, so what i gather is my net pay will be reduced from now on but not by a high %? I was just afraid that they will take all that was owed out of my next pay.

In regards to tax credits. I have 1650 euro tax credits. Why cant they just take all amount owed from my tax credits and everything then stays the same? Because its tax CREDIT why cant this happen.. Sorry if that a stupid question. It all double dutch to me .

This really should be taught in school.

The PAYE tax system works through two elements; Standard Rate band and Credits. These are applied through the year automatically when your payroll is run so there shouldn't be any need to look for them as they have already been utilised through the year.

They work in tandem. Your rate band for a single person is 35300 for the year. This is the amount you can earn and be taxed at 20% in. Anything over than is taxed at the higher rate.

So let's say you earn 20000 in the year. You should pay PAYE of 20% on that which is 4000 euro. This is where the credits come in. You have two standard credits, a 1650 euro personal one and a 1650 euro PAYE one. Add them together and they are 3300. This 3300 is taken off the 4000 to give you 700 euro to pay on your 20000 euro instead of 4000 euro. This is worked out through the year by your employers payroll.

I'm assuming you entered the figures for your pay tax and USC from your final year's payslip rather than waiting for your P60. Errors can happen at this time of year where people input their own figures incorrectly from their payslips rather than waiting for the P60. Post up your figures or a screen shot of the p21 with your name etc taken out and we will have a look at it.

Stanford

Please also indicate how Revenue have treated the medical expenses relief of €128 i.e. have you still underpaid PAYE when the medical relief is incorporated?