HMRC explains reason as customer told 'you will pay more'

HMRC has provided clarity regarding additional tax that some customers need to pay. The authority responded to an enquiry by explaining the figures to demonstrate how tax bills are calculated. A customer approached the authority regarding a message they had been sent. They said: "Please explain why my tax code has altered you say I owe £847 but you want to reduce my allowance by £4,235 and you will take £70 a month. Why has the tax code not been reduced by £847? This just looks wrong." They included a screenshot of a message they had received from HMRC. The message said: "You did not pay enough Income Tax for a previous tax year." The message indicated that they owed £847 and provided information about how this sum would be recovered. The message explained: "To collect this we have reduced your Personal Allowance by £4,235. "This means that you will pay more than until 5 April 2027, so that we can collect the 3847 owed. Your tax code has been adjusted for this." Your personal allowance represents how much you can earn annually before paying income tax. The standard personal allowance stands at £12,570 per year. The message also contained information about "what happens next". This portion explained: "At the end of the tax year we will assess your actual income for 6 April 2026 to 5 April 2027. We will contact you if you owe any tax or if we owe you a refund." In response to the query, HMRC explained: "We reduce your allowance by an amount that, when taxed, will collect the amount of extra tax to pay the underpayment. In your case, as a basic rate taxpayer, the restriction of £4,235 will collect £847 (£4,235 x 20% = £847)." The basic rate of income tax stands at 20 per cent, applied to annual earnings between £12,571 and £50,270. The higher rate of 40 per cent is charged on income between £50,271 and £125,140. Earnings beyond this figure are taxed at 45 per cent. However, there's another important rule to be aware of: once your income exceeds £100,000, your personal allowance decreases by £1 for every £2 earned above this limit. This means that by the time your income hits £124,140, your personal allowance disappears entirely.