Why Did I Get A Certificate Of Pay And Taxable Benefit And Tax Deducted Or Refunded?

If you are wondering why you’ve received a Certificate of Pay and Taxable Benefit and Tax Deducted/Refunded from HMRC, you will find the answer to this question as you read along the following blog post. In addition to this, you will also find detailed guidance on taxable benefits; as well as how to confirm or correct the information in your Certificate of Pay and Taxable Benefit and Tax Deducted/Refunded so that you don’t overpay your taxes and font need to claim a tax refund.

Why Did I Get A Certificate Of Pay And Taxable Benefit And Tax Deducted Or Refunded?

If you’ve received a Certificate of Pay and Taxable Benefit and Tax Deducted/Refunded, it means that the HMRC is confirming the income that you have gained through earnings in the form of wages and taxable benefits; as well as indicating how tax has been applied to them.

The Certificate of Pay and Taxable Benefit and Tax Deducted/Refunded provides recipients with the following information:

• total income through wages and taxable benefits
• total amount of tax deduction 
• NIC contribution for the year
• previous salary from an earlier employment
• total amount of previously deducted taxes
• statutory payments received such as maternity or paternity pay
• your final tax code
• details of student loan deductions (if any)

If there is a change in your circumstances during a tax term that reduces your income through wages or there is a reduction in your benefits payments, you should inform HMRC so that the correct amount is mentioned in your Certificate of Pay and Taxable Benefit and Tax Deducted/Refunded,

Since taxable benefits are not taxed at source, you would have to declare earnings through them through the self-assessment tax returns system to make sure that you are paying the due amount of taxes. However, if your payments are less than the Personal Allowance of £12,570, you will not be required to pay any tax on them.

The Certificate of Pay and Taxable Benefit and Tax Deducted/Refunded is also helpful in claiming overpaid taxes from the HMRC. This usually happens when there is a change in your circumstances such as becoming a part-time worker from a full-time one or a reduction in your benefits payments that may have led to overpaid taxes. You can claim a tax refund for up to four years in the past if this situation applies to you.

How Do I Know Which Benefits Are Taxable Per The Certificate Of Pay And Taxable Benefit And Tax Deducted Or Refunded?

While most claimants know that contribution-based Job Seeker’s Allowance and Employment and Support Allowance are taxable benefits and the amounts received through them are subject to taxation, a lot of people are not aware of all the state benefits that may need to be accounted for as part of the income declaration in the Certificate of Pay and Taxable Benefit and Tax Deducted/Refunded.

Taxable state benefits that are to be accounted for as per the Certificate of Pay and Taxable Benefit and Tax Deducted/Refunded include the following:

• Bereavement Allowance
• Carer’s Allowance
• Contribution-based Employment Support Allowance
• Contribution-based Jobseeker’s Allowance
• Incapacity Benefit from the 29th week of receipt
• Pensions paid by the Industrial Death Benefit scheme
• State Pension
• Widowed Parent’s Allowance
• Widow’s pension

How Are ESA and JSA Taxed In The Certificate Of Pay And Taxable Benefit And Tax Deducted Or Refunded?

Contribution-based ESA and JSA are taxed in the Certificate of Pay and Taxable Benefit and Tax Deducted/Refunded as per the following steps:

• The DWP operates a modified PAYE system on benefit payments and requires you to submit any P45 received from a previous employer upon claiming benefits. The P45 contains income paid and tax deducted in the tax year. 
• The DWP will pay the full amount of any benefit due without tax deduction or refund. 
• At the end of the tax year or upon cessation of the taxable benefit, the DWP will process pay and tax details up to the relevant date and provide a tax repayment if due. 
• If extra tax is due, HMRC will be notified to arrange collection. 
• If taxable ESA or JSA is still being received by a claimant at the end of the tax year, the DWP will issue a form P60 displaying sums paid, income paid, and tax deducted from previous jobs. 
• If ESA or JSA is stopped during the tax year, the DWP will issue a form P45(U) or P45(ESA) displaying sums paid, income paid, and tax deducted from previous jobs, which should be given to any new employer.

How Are Other Benefits Taxed In The Certificate Of Pay And Taxable Benefit And Tax Deducted Or Refunded?

While the state benefit is the commonly taxable benefit, all other taxable benefits (asides from ESA and JSA) are taxed in the following manner: 

• If you receive income from your state pension or other taxable benefits, the government will collect the tax from your employer or pension provider by changing your tax code. 
• If you have other sources of income that are also taxed through PAYE, such as from another job or UK pension, they will be taxed under the same code. 
• Sometimes, the government cannot collect all of the tax owed through your PAYE code, so they will contact you to arrange payment. This could be done through a form or a simple assessment. 
• If you don’t have any other PAYE income, the government will collect the tax owed on your state pension through a simple assessment or as part of your Self Assessment tax return. 

It is important to remember that the Department for Work and Pensions (DWP) doesn’t use PAYE to tax state pensions and other benefits, so you won’t receive the usual forms associated with PAYE. Instead, you’ll be notified before the start of the tax year about how much you’ll be receiving weekly from your state pension.

If you still have questions about taxable benefits and are eligible for a tax return for overpaid amounts, you should contact the HMRC on 0300 200 3300 or through their online contact points.

Conclusion:

The above discussion helps to conclude that receiving a Certificate of Pay and Taxable Benefit and Tax Deducted/Refunded is an indication of the HMRC confirming your taxable income through wages and benefits so that the correct amount is taxed. This certificate can also be used to claim a tax refund if you’ve overpaid your taxes due to an error or change if circumstances.

References:

How is tax collected on taxable state benefits?

Certificate of pay and taxable benefit and tax deducted refunded

Refunds for employees

Do Benefits Affect a Tax Refund? | Benefits that are Taxable Income