Currently, about 30 million of us receive an annual, personalised Tax Summary. This will soon be available to all UK taxpayers through the government’s Personal Tax Account initiative. The intention is that these accounts will have similar operating functions to your online bank account and will facilitate a host of different services.
The new Tax Summaries are to inform you of how much income tax and National Insurance you have paid during a tax year and how the government has spent it. HMRC say this is part of “creating a more transparent personal tax system”. As it is ‘for information only’, you don’t need to go through your employer or HMRC in order to view it.
What is my Tax Summary based on?
HMRC uses the information you supplied on your tax return and all of its other relevant records to work out your individual Tax Summary.
Taxable Income
Your ‘taxable income’ means the amount of income you receive from a variety of different sources, such as;
- Some state benefits.
- Work ‘perks’, such as a company car and other business benefits.
- Money you earn working for yourself or as an employee.
- Pension payments.
- ‘Other’ income, for example; pensioner bonds, dividends, property rental, savings interest.
Tax Calculation
The ‘tax calculation’ demonstrates how your NICs and tax were calculated by HMRC. This includes any necessary ‘adjustments’ (if you didn’t pay enough in the previous tax year) and the current tax rates.
HMRC do their own checks and balances at the end of every tax year. On occasion, the amount of PAYE tax you have paid is not the same as the amount that you should have paid. This is not due to anything sinister, just a simple change in circumstances can alter the equation. For example, if you receive different benefits or started a new job during the tax year in question. This can result in two different consequences; you will either own more tax to HMRC or they will owe you a repayment because you have actually made a tax overpayment. Either way, HMRC will send you a ‘P800 Tax Calculation’ which gives instructions about how the money will be repaid to you or collected from you.
In order to save money on unnecessary administration, HMRC have the following rule about collections and repayments. If you owe HMRC less than £4.99, then they will not collect. If they owe you less than £9.99, they will not repay.
How do I know what my employer has contributed?
There is a section in your Tax Summary that shows you how much Class 1 National Insurance contributions your employer has paid, as well as the amount you have paid. Employers are entitled to claim Employment Allowance for their contributions that are up to £2,000.
Tax and National Insurance
‘Tax rates’ determine how much Income Tax you pay and your ‘average rate of tax’ is a different calculation. It is based on the percentage of taxable income you paid in NICs and Income Tax combined.
The Tax Summary includes statistical information concerning how your Income Tax and NICs have been spent in that tax year. This is in a section called ‘How Public Spending was calculated in your tax summary’.
Is there anything not included in my Tax Summary?
Yes, some significant figures are not part of the individual Tax Summary.
These include;
- VAT
- Stamp Duty
- Fuel
- Customs and Excise duties
- Capital Gains Taxes, Inheritance Tax and information about other similar taxes is not included
- Other deductions, such as student loan repayments.
What if the details on my Tax Summary are different?
As this document is produced for information purposes, you don’t need to inform HMRC if there are differences on your Tax Summary. The idea is that it provides a ‘snapshot’ of your tax position at a particular time. But HMRC understand that your financial circumstances are fluid and change for a variety of reasons.
For example; your income is different to your estimate, your tax code has changed, your employee benefits have been cut or extended, you have made a tax repayment or been paid a tax refund.
There are also some taxable benefits which are not included because their tax regulations are more complicated and might require another person’s details. (For example; Carers Allowance, Bereavement Allowance.)
Some discrepancies also arise because of the Tax Summary’s format. On the Tax Summary, pension and income are stated with deductions being made, whereas on your bank statement the net figure is presented. Also, the pension payment is shown as a weekly amount on the Tax Summary, which won’t necessarily equate to an annual figure.
How do I get my Tax Summary?
If you are self-employed, complete a Self-Assessment Tax Return and have access to HMRC’s online services, then you can get your Tax Summary online. If you are an employer and pay tax through the PAYE system, HMRC will send your Tax Summary through the post.
HMRC welcomes any questions you have about your Tax Summary and, after you’ve received the first one, there is an ‘opt out’ option.
