2015 - Huston and Co

Unpaid salary – what if your employer paid you too little? What to do.

25NovApril 26, 2018 By Adrian Huston

My net salary is wrong. Why? What can I do?

This is quite a common occurrence, and this article is inspired by a story of unpaid salary Northern Ireland health service workers who in May 2014 were being paid less than they were due, or in some cases being paid twice! The unions NIPSA and Unison were understandably cheesed off with this issue – blamed on a new payroll system installed in October 2013. A 6 minute interview with a union official and me about this case is at http://youtu.be/Ri9SfcNVAE0

This article will tell you how to complain if you are paid the right amount, and how to take a case to an Industrial Tribunal or Employment Tribunal. Also the websites and phone numbers.

Why might your employer pay you too little or too much:

Their computer system is playing up (as above)
They are using the wrong tax code (or National Insurance code)
They have decided to deduct something from your pay – maybe for accommodation, or something you damaged
They worked out your pay wrongly

Let’s look at these scenarios in a little bit more depth, and consider your options.

Computer system playing up

These days it is very easy to blame computers for things going wrong, but of course it needs a human to be at the heart of the problem. That human might have designed the system poorly. Or they might work in payroll and have put the wrong information into the computer (and guess what comes out!)

One is much less sympathetic when the employer has hundreds or thousands of employees, because the assumption would be that they buy in a powerful payroll program or service which can cope with all eventualities. (More on this later.)

Using the wrong tax or National Insurance code

Lots of people are aware of tax codes, even if they don’t fully understand them. Fewer people are aware that there are different codes for National Insurance, and these too can make a big difference to your net pay. NI codes appear as letters, A, B etc. A is the standard one.

Your tax code tells your employer how much tax to take off you each pay-day. No amount of complaining to your wages department will get your tax code changed. They can only change the code on instruction from HMRC.

If you think your tax code is wrong then phone HMRC on 0300 200 3300. They are open 8 to 8 Monday to Friday and until 4 on a Saturday. Have your National Insurance number handy, and make sure to note down the name of the person you speak to, plus the date and time of the call.

If HMRC agrees that your employer is operating the wrong code they can issue one to work. It should then be used in the next payroll run. If not then talk to your wages department or to HMRC again.

Our son recently had an employer who operated the wrong tax code and even after HMRC issued correct ones, still failed to use them. It took a lot of pressure to get the thing sorted. Don’t give up!

National Insurance (NI) codes tell the wages department how much NI to take off your pay. A lot of people are on the same NI code and all will work smoothly. However if someone has more than one job, they can ask HMRC to issue a special NI code, and save themselves money.

On the National Insurance type of problems, my wife Felicity Huston worked part-time for the Northern Ireland civil service, as well as being a director of Huston & Co. She applied to HMRC and the correct, special NI code was issued to the civil service. They refused to operate it, potentially costing Felicity over a thousand pounds a year. Despite employing tens of thousands of staff, they claimed their payroll system was incapable of using this special NI code. Only by threatening taking a claim to an Industrial Tribunal (Employment Tribunal) did the civil service wake up and smell the coffee. Somehow they managed to do what HMRC was requiring of them.

Refusal of an employer to operate a tax or NI code is simply not an option. The law requires the employer to do as HMRC says.

If you are paid too much, then your employer is entitled to have their money back. If you have spent it before the problem came to light them your employer should be reasonable in how they ask you to repay it. They might, for example, seek your agreement to paying it back over a number of months.

Employer has deducted something from your pay

Sometimes your pay packet is light because your employer has deducted something else, apart from tax and National Insurance. This could be for:

Replacement uniforms
Damaged goods or equipment
Accommodation
Private phone calls on a company phone
Private purchases on a company card

The key tests here are firstly is the deduction correct and fair? Secondly is the employer entitled simply to deduct this from your pay? Check your contract or staff handbook.

If you think the deduction is wrong, or shouldn’t have been taken out of your pay, then you should raise this matter in writing with your employer, in the first instance. In unsatisfied with their response there needs to be an appeal, and then you can take the matter of unpaid salary to an Industrial Tribunal (or Employment Tribunal.) The claim you are making is that the employer has made an “unlawful deduction from wages.”

Employer has worked out your pay incorrectly – you have unpaid salary

This could be because you feel you have unpaid salary or wages as they haven’t

paid you for all your hours worked
paid overtime at the right rate
paid you less than an equivalent worker of a different sex
given you the sick pay you were entitled to

In each of these cases you need to put your concern in a letter to the employer, and if need be then appeal their decision. After that you are back to taking a case to an Industrial or Employment Tribunal.

Contacts for Industrial Tribunals / Employment Tribunals

Northern Ireland – http://www.employmenttribunalsni.co.uk 028 9032 7666

England & Wales – http://www.justice.gov.uk/tribunals/employment 030 0123 1024

Scotland – http://www.justice.gov.uk/tribunals/employment 014 1354 8574

At all of the stages of taking a complaint you could use your trade union or solicitor to help make your case, but of course the solicitor will need paid, the union will offer free advice, as will Citizens Advice.

Adrian Huston is a former tax inspector, now director of Huston & Co Tax Consultants & Accountants. www.huston.co.uk 028 9080 6080 @HustonTax

Tax codes explained – are you on the wrong tax code?

24NovApril 26, 2018 By Adrian Huston

Is my tax code wrong?

Tax codes dictate how much tax we lose from our wages and pensions. If they are wrong then the tax is wrong. If we don’t spot it then there is no guarantee that HMRC will! This is why understanding tax codes is important.
Unless your tax code begins with a K, or is BR or D0, then there is a simple rule of thumb. Most tax codes show your tax-free allowances, but divided by 10.
For example the standard tax-free Personal Allowance is £10,600. Divide this by 10 to get the tax code. Thus most people are on a code of 1060L.
Picture is an example tax code for 2015/16 for a 40% taxpayer who pays gift aid and personal pension contributions

HMRC tax code — Example tax code for 2015/16

Adjustments to tax codes
Sometimes HMRC will try to make adjustments to your tax code. This is normally a good thing. They are trying to have the correct amount of tax deducted from you over the year. In theory this should leave your tax correct at the year-end of 5 April.
Examples of adjustments made include:
• State pension or benefits expected
• Collect tax owed from an earlier year
• Rental profit estimated
• Company car – the taxable benefit
• Relief for professional subscriptions you pay
• Relief for gift aid payments (if you pay higher-rate tax)
• Higher-rate relief for pension contributions
So your tax code may have extra allowances added – to give you extra tax relief. Or it may have things deducted – HMRC’s way of taxing some income.
By far the most common adjustment is to reflect the state pension HMRC thinks you will get this year. State pension is taxable, though if that was all you earned it would be below the tax-free Personal Allowance. However if you have another source of income, and it is taxed at source, then HMRC will try to collect the tax due on both the pension and that other source, all from the same place. This can make it look like you are losing a lot of tax from your job or works pension. In fact you are losing the tax from two sources of income, but only having it taken off one!
What if I think my tax code needs changed?
You need to contact HMRC in one of two ways:
• Phone them on 0300 200 3300 (open 8-8 weekdays, 8-4 on Saturday)
• Write to them at HMRC, BX9 1AS. (Yes the address is that short.)
If you are nervous about phoning them then write to them. The answer may take longer, but at least the answer will be in writing. You will have time to study it. If phoning then write down the date of the call and who you speak to.
If you don’t understand part of what makes up your tax code – then ask for it to be explained. It is the tax official’s job to help you understand.
What happens if code is wrong and I do nothing?
Then your employer or pension provider will deduct the wrong amount of tax. Depending on the error, this may never be discovered by HMRC, and you could lose out.
Deferred state pension
HMRC is normally told how much state pension you will get. They use this to adjust your code. The adjustments are NORMALLY correct.
However I have seen some cases recently were people put off receiving their state pension for a few years. I found that HMRC was adjusting their tax code each year. In other words HMRC assumed they were getting the pension, and were taxing them too highly. One client was owed a tax refund of thousands.
Unusual codes
Here are the most common codes which are NOT simply 10% of your tax-free allowances after adjustments:
• BR – means deduct Basic Rate tax of 20%. Used for second jobs, extra pensions etc.
• D0 – means deduct 40% tax. Used for second jobs where the person pays higher-rate tax.
• K codes – mean the items deducted from the code are greater than the allowances, and you have a negative amount of tax-free allowances. The K code is roughly 10% of the negative allowances. These codes are most common with company cars or large state pensions.

In conclusion

• Tax codes dictate the amount of tax your employer deducts.
• They may be wrong, and the mistake can go undiscovered.
• If in doubt ask HMRC to check your tax code.

The author Adrian Huston, a former tax inspector, is a director of Belfast tax and accountancy firm Huston & Co – www.huston.co.uk or 028 9080 6080.

Rent out property in UK-rules for non-resident landlords – NRL1

19JulApril 26, 2018 By Adrian Huston

Are you non-resident for tax purposes, either because you live abroad or live in UK but work abroad, and rent out a place in the UK?

Do you own a property in the UK which you rent out?

Answer YES to both of these and this video ,which I filmed in Umbria, is for you – see below.

If you have a UK rental property and are non-resident for tax purposes then you face two stark choices:

You can declare the rents and expenses to HMRC each year, or
You can have basic rate tax (20% in 2015/16) deducted from the rents before you get them.

This latter point is quite painful and often means you will pay more UK tax. This is because you cannot claim any expenses. Also you do not get any Personal Allowance. (The amount of UK income a UK person can earn before tax, £10,600 in 2015/16.)

The law requires your letting agent to deduct this tax and pay it to HMRC. If you do not have a letting agent then this onerous law means the TENANT must deduct the tax and pay it to HMRC!

If you prefer to declare your rents each year, then you can complete a tax return each year. But first you must send HMRC form NRL1.

Huston & Co are specialists in tax for non-residents and have hundreds of British clients living or working abroad, many getting rent in the UK. We can help you with all this. We can complete the NRL1 form and also the annual tax returns, leaving you to enjoy life with a clear conscience. Directors Adrian Huston & Felicity Huston are both former Tax Inspectors. This is a family firm with no outside staff.