For many older people, the amount of payroll tax deducted is much lower than the income tax due. What is the reason for this? State Secretary Vijlbrief recently explained this once again in a comment in response to a parliamentary question.
Discrepancy between payroll tax deducted and income tax due
Where there are several withholding agents, a discrepancy may arise between the total amount of payroll tax withheld and the income tax due. This is because withholding agents only take into account the income they themselves have paid out.
When calculating the payroll tax to be withheld, each withholding agent applies the payroll tax table individually, starting with the tax bracket with the lowest rate. If all income is added together, some or all of it may not be taxed at the lowest rate but at a higher rate. The income tax actually due is then higher than the payroll tax withheld.
Furthermore, the cause may lie in the application of the payroll tax credit by more than one authority. The payroll tax credit is a reduction in the tax due. It can only be applied once.
Solution
Apply for a provisional income tax assessment for the current tax year at an early stage. To do this, you will need to estimate your total expected income. It is also important to consider any allowable deductions and other sources of income and assets that are relevant to the amount of income tax due.
Any tax that has not been deducted in full is paid via a provisional tax assessment. You have the option of paying the assessment in a single instalment or in monthly instalments throughout the tax year. This ensures you won’t face any surprises later on and that you know exactly how much net disposable income you have each month.
In addition, you can choose not to have the payroll tax credit applied by any withholding agent, or request that the withholding agent withhold and pay a higher rate than that prescribed by the income tax table. The disadvantage is that your overall circumstances, which are relevant to the calculation of the income tax due, are not taken into account. As a result, you may subsequently be faced with a tax assessment that you have to pay.