HMRC have began their annual process of issuing P800s to PAYE employee. The P800 is a tax calculation which checks whether tax payers who pay their tax through their payslip (and are not required to submit a tax return), have paid too much or little tax during the tax year. The P800s currently being issued by HMRC relate to the 2015-16 tax year (running from 6th April 2016 to 5th April 2016).

 

Why do I have an underpayment?

Underpayments of tax can arise from a number of reasons, including:

  • The tax due on benefits in kind (eg. company car or health insurance) can’t be accuratley collected through your tax code
  • Incorrect tax code has been issued by HMRC which doesn’t take into account all of your income
  • Multiple employers where the tax code is unable to handle differing rates of tax
  • In receipt of the state pension where your tax code hasn’t taken this into account
  • Several jobs in the space of one tax year
  • Long period between leaving one job and taking another
  • You have received a bonus during the tax year
  • Your are paid irregular amounts by your employer
  • Your employer has made an error
  • HMRC have made an error

 

What to do if I have an underpayment?

The first thing to do is to check the calculation against your records. Your employer should have provided you with a P60 which shows your salary and the tax you have paid on this (if you left employment during the tax year, you should have been issued a P45). If you are in receipt of a benefit in kind, you should have received a P11D from your employer. Recipients of pensions should also receive P60s from their pension providers.

If you believe the calculation to be wrong, write to HMRC and inform them of the reason you believe it to be wrong.

If the calculation is right, contact HMRC to arrange how you wish to repay the amount. In most cases this can be done through any adjustment to your current year (2016-17) tax code and they’ll deduct the extra tax due at source.

If you’re unsure, contact a professional advisor for help.

 

I have an over payment

In the case of an over payment, you should expect to receive a cheque from HMRC within 14 days of the issue of the P800 calculation. The reasons for an over payment are very much the same as the reasons listed above for an underpayment.

 

Why isn’t my tax right in the first place?

PAYE is a method of collecting tax, not a method of assessing tax. HMRC can therefore not always collect the right amount of tax through your payslip.

 

Useful Links

The Low Incomes Tax Reform Group’s useful guidance – http://www.litrg.org.uk/tax-guides/employed/what-if-i-do-not-pay-enough-tax#toc-how-do-i-check-my-p800-calculation-

The Gov.uk guidance – https://www.gov.uk/tax-overpayments-and-underpayments

 

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