As a submitter of the tax return, you feel so relieved to finally submit the tax return and get the notification of confirmation that it will make you feel even more accomplished. However, when the time comes to receive the tax bill, your potential bubble bursts out. The reason behind this could be something you have received other than your expected tax bill or you are elated. This is such an unwelcome but common thing among people which might leave you wondering about why is your tax bills so high.
We all know such circumstances when it becomes nearly impossible for you to have enough to pay high tax bills right on time. The first thing is to try your best to pay the tax bills until the last date. In the case of filing the tax returns for the tax year 2022-23, the last date for filing the tax returns will be by the end of January, 31st 2024. In case you inform HMRC that you are struggling with the tax payment, there is an option of arranging a payment plan by HMRC.
Why is My Tax Bill so High?
If your tax bill is higher than what you expected, the first thing to do is to be calm. Even if the figure you are observing is way more than what you expected and you are wondering how can that be the right number? Sometimes, the number is right, however, there is a possibility that you are looking at the wrong number. The difference can occur due to particular reasons which we have listed and explained below for your understanding.
1- Multiple Income Streams
The sound of multiple income streams is so pleasant until you realise that all of them have to add to the list of tax returns. When you are earning through multiple sources and your income stream is more than one, this will be considered as one as a whole according to HMRC. While filing the tax returns, you will have to keep this in mind and expect the tax bill accordingly. For instance:
- You are in a full-time job and earning an amount of £40,000.
- You are also a seller and make a profit from selling handcrafted keyrings. Now your profit in the tax year 2021-22 was an amount of £15,000.
- Then you are a user of crypto and have earned a profit figure of £20,000
All of your income streams and earnings will be considered and your tax bill will be calculated accordingly.
2- You have a Wrong Tax Code
Yes, you heard it right, there is a possibility that you have received the wrong tax code from HMRC. This happens more than you can expect and sometimes it becomes very difficult to spot such a mistake. If your employment status makes you an employed individual, you need to have an understanding of the tax code. In the case, you have figured out that your tax code is wrong, immediately get in touch with HMRC. Your tax code has a major role in the variation of your tax bill. You can find your tax code on your payslip, P45, or P60, you can even reach out to HMRC to get the right information.
3- There is an Issue in HMRC’s Records
Sometimes it happens that the record with HMRC is not right. Due to no updated information with HMRC, you can get a tax bill that is higher than it should be. This is why it is important to quickly inform HMRC if there is a change observed in your employment status or any other possibility that you think might affect your tax bills.
4- Your Employment Income is not Added
A common mistake made among people is that they do consider filing tax returns on time, however, the main employment or source of income is not catered well. In other cases, people tend to keep the side gigs hidden from HMRC which becomes a reason for inaccurate tax bills. You are suggested to declare all the income sources to HMRC so that there are no mistakes found in your tax bills. You are better aware of your side hustle whether it is through online selling or offering your services to customers other than your main job.
5- Wrong Calculations
If you figure out that you have made a mistake in the calculation while working on the tax returns, you need to calm down and not panic. It is humanly possible to misread a figure while working with your spreadsheet and now the tax bill is way more than your expectations. You can even reach out to an expert to make the corrections for you rather than doing the procedure of tax returns all over again. Use the offer of online calculators to make accurate calculations.
The Bottom Line
Now that you have gathered a fair amount of information about the tax bill so high, we can say that there can be a lot of possibilities due to which you have received a tax bill that was higher than your expectations. However, even if you have made a mistake or there is an issue with the details provided by HMRC, you do not need to worry rather focus on the solution by getting in touch with HMRC. There is always a solution to any possible mistakes as stated above. We hope these few minutes of reading have helped to develop a better understanding of unexpected higher tax bills and you can handle such circumstances more professionally now.
Reach out to our team of expert professionals to get your queries answered instantly. We will love to come up with the best possible solutions.
Disclaimer: The information about the tax bill so high provided in this article includes text and graphics in general. It does not intend to disregard any of the professional advice.