Hi Roverrunner76.

A great question, but not necessarily anything to be concerned about.

When you sign a trust deed all qualifying debts are included. This includes tax owed.

HMRC seem to be acknowledging that the tax owed when you signed your trust deed has become a debt covered by it. They should receive a payment from your trust deed rather than collecting the money directly via your tax code. They have no special rights. They’re just another creditor.

So your net income may increase, and your trust deed payment might increase, but you should be no better or worse off as a result.

When you complete your obligations and are discharged, any debt to HMRC that existed when you signed your trust deed that hasn’t been fully repaid will be written off just like the others.

I missed the question regarding your employer in my answer.

So your employer might potentially become curious I suppose, or they might just see a routine HMRC communication and pay little attention to it.

They could go looking for information by asking you about this, or by checking the public insolvency registers, but I guess the open question is why they might want to?

Probably not an issue (or at least I’d hope not) but there’s no getting around the fact that a public register of insolvencies does exist. Not that many people know about it or would think to check it.

Thanks for the info. All very interesting, but if tax arrears due to calculation errors from HMRC are treated as 'debt' then why was I not asked this when initially speaking about my outgoings ? I was asked for my NI number but at no point was tax owed discussed or put into the CFT. £900 is significant.

Hi Roverrunner76.

My assumption would be that you didn't recognise this as being a debt and therefore didn't bring it to the attention of your trustee.

Your trustee may have assumed, in particular if you are a PAYE employee with a monthly deduction being handled by your employer, that no tax arrears/debt existed.

That's just speculation though. You should be no better or worse off as a result of this development.

Just to add one more point to the good advice that Trust Deed Assistant has already provided.

You shouldn't wait until review time before you let your trustee know about any change to your income as a result of the changes to your tax code. Any significant changes should be reported to them as soon as they happen.

Ok, following on from the letter I received, I was paid on Friday, expecting my income tax to be £20 - £30 less. My income tax on my Friday salary was actually only £57 when it should have been around the £435. I'm now VERY confused because I'm on around £36k pa with gross monthly salary of £3344.

My understanding from the letter was that the EXTRA tax that I owed would be removed from my monthly bill but for it to have fallped from £464 to £57 is considerable and I don't understand why.

I will phone tax office tomorrow but I know I'll be put on hold for goodness knows how long and then I'll be put through to somebody who will speak a load of tax jargon and tax codes that I simply don't understand.

I know I need to tell my trustee about this extra £400 I have, but if the is an error from HMRC then they may ask for it back so I need clarification before telling my trustee. Paying only £57 per month tax for a £36 pa job is almost a form of tax evasion and I don't want that on my record.

This is really stressing me out.

For info, I was on tax code S941L and I'm now on S1150L

Hi Roverrunner.

So you've probably paid too much tax for a while (while HMRC were collecting arrears via your tax code) so this now corrects the other way (after HMRC identifies the issue) to reduce your monthly tax until this all levels out at some point in the future.

This may, essentially, be HMRC giving your overpayment back to you. Your trustee is likely to to expect that overpayment (via your increased net income) to be paid into your trust deed.

I appreciate that you're stressed, but you're paying your trustee to deal with complicated situations like this for you. I'd contact your trustee (rather than HMRC) and let them advise you and deal with it for you.

The adjustment to your code probably means that the tax you have overpaid will come back to you through a reduction in your tax payable up until the end of the tax year. Because this is only around 5 weeks away, the effect is that your tax bill is reduced quite dramatically for the last couple of paydays before April 2018.
At least I think that is what is happening!