HMRC Earnings

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Looking for help completing a tax return. 

Using round numbers, have client who left his job during 2023/24 tax year and obtained p45. P45 and HMRC income viewer shows earnings of £3,500. However on self assesment account there is earnings bewteen PT and UEL of £4,840. 

Any ideas of what difference bewteen these are. 

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By Not Anonymous
29th May 2024 14:03

"However on self assesment account there is earnings bewteen PT and UEL of £4,840"

They are NI related references. Is that a factor for your client? For most it isn't.

Where on the Self Assessment account is it shown?

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By craigleeds
29th May 2024 15:56

It is shown under information to help complete a tax return on HMRC gateway

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By FactChecker
29th May 2024 14:20

"have client who left his job during 2023/24 tax year and obtained p45. P45 and HMRC income viewer shows earnings of £3,500. However on self assessment account there is earnings between PT and UEL of £4,840.
Any ideas of what difference between these are?"

Presumably there were earnings during that tax year from somewhere other than the employment shown on the P45?

Or, of course, it's possible that client paid Pension contributions via payroll (depending on scheme type, those contributions are tax-free but not NI-free - so taxable pay reduces but NI'able pay doesn't)?

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By craigleeds
29th May 2024 15:59

That what we thought, there would be other employment earnings, but none are shown on HMRC income viewer record.

The client did get redundancy payout from government, under the £30,000 tax free amount, would this be ni able earnings and be difference. I still don't know why it would not show as part of HMRC income.

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By More unearned luck
29th May 2024 15:16

It is obvious that you are missing facts. It is equally obvious that Aweb members can't supply the missing facts. Presumably your client can. Ask your client for details of any other jobs and for the payslips for the job you know about and of any other job where the tax voucher is a P45. These will enable to correctly choose between FC's explanations.

Does anyone know why the NIC and SLR data on P60s don't also feature on P45s? In cases where it matters it seems very odd that the taxpayer or his agent need to revert to payslips.

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By craigleeds
29th May 2024 15:55

I do take your point, but client says no other jobs. I would assume any jobs should show through HMRC agent services income viewer for our client. Nothing else is shown there.

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By FactChecker
29th May 2024 22:04

My two possible 'explanations' were by no means exhaustive - indeed kim.shaw-and-co.com has added another even more plausible option that I'd forgotten.

But with regard to your "Does anyone know why the NIC and SLR data on P60s don't also feature on P45s?" ... I can provide the reasons I was given (it's no justification - just the responses when I've asked HMRC that self-same question in the past):
* "We (HMRC) don't need a P45 any more, RTI has got rid of it"
Me: "What about the part given to a new employer (so they know YTD values + what tax code to use + whether a SL deduction notice is being operated)?"
* "Aah! Well you can throw away the part you used to send us (see above), but give the other part to EE for new employer"
Me: "OK - but the SL data is just a checkbox (Y/N in operation) with no indication as to which Plan type etc?"
* "Aargh! Well as we've just said, but tell new ER to ignore the SL flag ... we'll send them a new Start notice (and that'll have the Plan type)"
Me: "So ... now we need the P45 (which you previously said was dead in the water) BUT must ignore the SL bit and await an SL1 (which may arrive too late if EE has left us before it arrives)?"
* "You're not being very helpful are you?"
Me: "Helpful? You don't understand the meaning of the word unless it applies to HMRC and not the ER or EE ..." (led away gibbering quietly).

You may have noticed that NICs don't feature in that extract - nor indeed the fact that P60s have become generally useless (in a world with peripatetic EEs who have multiple concurrent employments) when preparing an SA return. And that's because there are an almost infinite number of such stories (where I've battered my head against the intransigence of HMRC 'policy' to no avail) ... with but one common theme: it never occurs to them to consider anything other than from the perspective of short-term benefit to them (the benefit often proving illusory)!

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By kim.shaw-and-co.com
29th May 2024 16:11

It is possible that the relevant individual has received payment(s) after leaving (i.e. after the P45 was issued). An example could be leave pay. These may not be captured on income record viewer against the relevant employment if a date of leaving had already been submitted through RTI before the subsequent payment was made by the (former) employer.

Income record viewer is completely unreliable as soon as a leaving date is received by HMRC - I have continuing directors who ceased a contract of service under P45 only to re-commence a couple of years later whose income never shows up on IRV.

A P45 cannot be assumed to represent the entirety of a person's taxable earnings from an employment in a tax year. They should have a letter or payslip for any further income received (including any corrections to amounts originally included on a P45), and if they don't then they may need to get details from their former employer to ensure all of their income is taken into account.

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By FactChecker
29th May 2024 19:11

Indeed ... another one (of potentially many) reasons for the situation set out by OP.

OP: For the avoidance of doubt:
1. An employer is not allowed to re-issue a P45 once the source FPS has been submitted (which closes* that 'employment record' on HMRC's database) - so any payment-after-leaving (belated claim for overtime or holiday pay or ..) will be processed in a subsequent pay period and although a Payslip should be issued to go with that 'extra' pay, it won't be reflected in a new P45.
2. Generally a P45 is not intended, by HMRC, to be used as 'proof of earnings/tax paid' for an SA - it's purpose is simply for ex-employee to give to new employer (in the hope that the first earnings there will be treated approximately correctly).

* = I've simplified the process here, in the hope of saving everyone's sanity (and my typing fingers), but the gist is correct.

The reliability of the IRV is another matter entirely - suffice to say that it is at best a guide not a guarantee of accuracy.

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By richard thomas
30th May 2024 10:49

In relation to point 2, why then does the rubric of box 1 on Sa102 and the notes refer to a P45; and why do they open an enquiry if the figure in box 1 from a P45 does not match their records?

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By kim.shaw-and-co.com
30th May 2024 14:14

richard thomas wrote:

In relation to point 2, why then does the rubric of box 1 on Sa102 and the notes refer to a P45; and why do they open an enquiry if the figure in box 1 from a P45 does not match their records?

There are numerous instances where the total taxable earnings from an employment will not agree to the figure on a P60 or P45. An example being a non-tax equalized individual entitled to Overseas Workday Relief with a s690 direction limiting PAYE income based on an estimate for the year.

It is generally understood that in practice you completely disregard the rubic and either enter total pay from the employment in Box 1 (with claim for a deduction from earnings on Page Ai2) or the actual taxable (typically s15) earnings in Box 1 with a calculation of how the figures have been arrived at in other information.

The notes on Page AiN3 and AiN4 of SA101 explain how to deal with termination payments that do not fall to be treated as income from the employment - the point is really ensuring that relevant taxable income is brought into account in the Return to the appropriate extent and it is not always necessary to 'place it' according to HMRC Guidance provided the relevant income and tax calculated as due thereon is included, and an explanation provided in the Return.

What is required to do this, however, is a full understanding of what income has arisen in connection with the employment and its termination so that this can be properly analysed and reported by the taxpayer. All a P60 or P45 will include is the amount of income that the employer has treated as "PAYE income" up to the time it is issued.

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By FactChecker
30th May 2024 16:49

Sorry, one of my medical days so late back to the fray.

But the unhelpful answer is ... there is no 'why' (in the sense of any expected logic).
HMRC told me back in 2013 that the P45 would 'die next year' (with RTI then up and running) - because they'd started to believe their own PR (like the 'death of the tax return') and had forgotten that the P45 had any other purpose than notifying *them* of an individual's employment having ended.

My point 2 was simply a rather brief nod towards that belief, which had become endemic in the policy levels of HMRC from then on.
It took several years (unlike my tongue-in-cheek summary in my earlier post above) for HMRC to 'resolve' the starter checklist (and ever-changing associated guidance for what to do with a previous P45 - depending on how old it was and whether it crossed tax years and so on).

So they weren't best pleased when, after the announcement of multiple SL Plan types, I pointed out the next hole in 'their' processes for handling a new employee.
I did suggest the simple solution of an extra box on the P45 ... but, like the ghost of Christmas past, I was reminded that "the P45 is a dead form so we're not spending money on it"!
Cue - another few years of revisions to the checklist and the guidance.

So far I've only touched on edited highlights of how far the P45 was from the forefront of the HMRC collective mind in terms of 'taking on an employee'.
I had less to do with the 'impact' on an SA return but, given the above, it wouldn't surprise me if the answer to your question was:
"Huh? .. P45, isn't that dead? ...Why would we spend money on reviewing more paper forms and guidance, when it's all about to 'go digital' innit?"
Or, of course, no-one (in HMRC) cares any more?

BTW "why do they open an enquiry if the figure in box 1 from a P45 does not match their records?"
In my (relatively limited) experience, they don't (at least not automatically).
[Maybe it's automated but with tolerances for typical after-leaving' payments, or maybe the automation merely triggers a 'need to review' by a human ... but I've (famous last words) never been on the receiving end of an Enquiry, despite there being a 'mismatch' (for valid reasons I hasten to add).]

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By More unearned luck
30th May 2024 11:41

As regards Kim's point; the rubric to box 1 on the employment pages of a TR can be read that post P45 pay is excluded. It reads "Pay from this employment – the total from your P45 or P60 – before tax was taken off". Which figure do HMRC want: the number on the P60/P45 or the pay from this employment? Why ask for a figures that can differ and provide only one box? The notes tell you to include post P45 pay.

But the notes also tell you to subtract lump sums etc, so that the figure HMRC want taxpayers to include in box 1 is only some of 'the pay from this employment' and is also not 'the total from your P45 or P60'. Taxpayers are required to give a declaration of truth yet HMRC instruct taxpayers to give a sum in this box than doesn't match the rubric.

The word 'total' is ill chosen because the figure to be copied from a P60 is the 'this employment' figure and not the 'Total for the year figure'.

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By More unearned luck
30th May 2024 11:41

As regards Kim's point; the rubric to box 1 on the employment pages of a TR can be read that post P45 pay is excluded. It reads "Pay from this employment – the total from your P45 or P60 – before tax was taken off". Which figure do HMRC want: the number on the P60/P45 or the pay from this employment? Why ask for a figures that can differ and provide only one box? The notes tell you to include post P45 pay.

But the notes also tell you to subtract lump sums etc, so that the figure HMRC want taxpayers to include in box 1 is only some of 'the pay from this employment' and is also not 'the total from your P45 or P60'. Taxpayers are required to give a declaration of truth yet HMRC instruct taxpayers to give a sum in this box than doesn't match the rubric.

The word 'total' is ill chosen because the figure to be copied from a P60 is the 'this employment' figure and not the 'Total for the year figure'.

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By More unearned luck
30th May 2024 11:41

As regards Kim's point; the rubric to box 1 on the employment pages of a TR can be read that post P45 pay is excluded. It reads "Pay from this employment – the total from your P45 or P60 – before tax was taken off". Which figure do HMRC want: the number on the P60/P45 or the pay from this employment? Why ask for a figures that can differ and provide only one box? The notes tell you to include post P45 pay.

But the notes also tell you to subtract lump sums etc, so that the figure HMRC want taxpayers to include in box 1 is only some of 'the pay from this employment' and is also not 'the total from your P45 or P60'. Taxpayers are required to give a declaration of truth yet HMRC instruct taxpayers to give a sum in this box than doesn't match the rubric.

The word 'total' is ill chosen because the figure to be copied from a P60 is the 'this employment' figure and not the 'Total for the year figure'.

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By kim.shaw-and-co.com
30th May 2024 14:18

Good points ...

richard thomas wrote:

In relation to point 2, why then does the rubric of box 1 on Sa102 and the notes refer to a P45; and why do they open an enquiry if the figure in box 1 from a P45 does not match their records?

There are numerous instances where the total taxable earnings from an employment will not agree to the figure on a P60 or P45. An example being a non-tax equalized individual entitled to Overseas Workday Relief with a s690 direction limiting PAYE income based on an estimate for the year.

It is generally understood that in practice you completely disregard the rubic and either enter total pay from the employment in Box 1 (with claim for a deduction from earnings on Page Ai2) or the actual taxable (typically s15) earnings in Box 1 with a calculation of how the figures have been arrived at in other information.

The notes on Page AiN3 and AiN4 of SA101 explain how to deal with termination payments that do not fall to be treated as income from the employment - the point is really ensuring that relevant taxable income is brought into account in the Return to the appropriate extent and it is not always necessary to 'place it' according to HMRC Guidance provided the relevant income and tax calculated as due thereon is included, and an explanation provided in the Return.

What is required to do this, however, is a full understanding of what income has arisen in connection with the employment and its termination so that this can be properly analysed and reported by the taxpayer. All a P60 or P45 will include is the amount of income that the employer has treated as "PAYE income" up to the time it is issued.

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By FactChecker
30th May 2024 17:11

All good points/examples ... almost worth repeating 3 times!
I was trying to recall which got dumb-downed first, GOV.UK guidance or the rubric that accompanies tax forms (such as in this case SA)?

The result is multiple occurrences of such inconsistencies ... which when I (used to) point them out to HMRC got me labelled a pedant (and probably worse behind my back).

TBH I no longer have a solution other than the fool's gold of 'tax simplification'.
Many of the questions on this site (including several from practitioners) indicate a poor level of understanding both of tax rules and of how/when to report things ... possibly only matched by the low-bar of understanding evinced by most HMRC staff?
Better guidance (including a wider range of worked examples)? Or better education of the population at large (and taxpayers in particular)? Or bringing the rules into line with what most can comprehend (like universal, single-rate VAT)?

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By kim.shaw-and-co.com
30th May 2024 18:06

More unearned luck wrote:

As regards Kim's point; the rubric to box 1 on the employment pages of a TR can be read that post P45 pay is excluded. It reads "Pay from this employment – the total from your P45 or P60 – before tax was taken off". Which figure do HMRC want: the number on the P60/P45 or the pay from this employment? Why ask for a figures that can differ and provide only one box? The notes tell you to include post P45 pay.

But the notes also tell you to subtract lump sums etc, so that the figure HMRC want taxpayers to include in box 1 is only some of 'the pay from this employment' and is also not 'the total from your P45 or P60'. Taxpayers are required to give a declaration of truth yet HMRC instruct taxpayers to give a sum in this box than doesn't match the rubric.

The word 'total' is ill chosen because the figure to be copied from a P60 is the 'this employment' figure and not the 'Total for the year figure'.

I tend to take no notice of anything after the words "Box 1". Cash earnings from the employment are put in it whether they are on P60/P45 or not (including PILON to the extent it equates to basic pay for the notice period that must be taken into account in relation to the departing employee - i.e. greater of contractual or statutory).

In the lump sum pages, only PENP in excess of the (greater of the) contractual/statutory minimum is an amount potentially eligible for inclusion in the £30k exemption, and that is what is treated as a lump sum termination payment there.

Sometimes it helps just to ignore what HMRC write and include sums where they will result in the correct tax being paid, provided you are clear what it is you are doing in the first place. There is nothing preventing a brief clarification being put in 'Other information' so HMRC are clear what you have done.

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