What happens if I do not pay enough tax?
If you are an employee, your employer takes tax off your pay throughout the tax year via Pay As You Earn (PAYE). In most cases, this means you pay the correct tax by the end of the year; but not always.
You should always check your tax, even if you think everything should be straightforward.
If you have not paid enough tax, HM Revenue & Customs (HMRC) will usually send you a tax calculation (a P800) for a tax year.
What situations can cause me not to pay enough tax?
PAYE usually collects the right amount of tax where you have a stable employment that lasts a complete tax year. If your tax affairs are more complicated than this in the tax year, the PAYE system might not be able to collect the right amount of tax during the year.
You might not pay the right amount of tax if, for example, you:
- have more than one job, or pension, or are in receipt of a taxable state benefit or some other untaxed income;
- change jobs or retire;
- draw income flexibly from your pension;
- are widowed or your civil partner dies;
- get extra benefits or expenses payments from your employer on top of your cash wages;
- need to claim extra allowances or expenses against your tax;
- leave the UK or arrive in the UK from overseas.
In these and other situations, HMRC might need to send you a PAYE tax calculation (a P800) after the end of the tax year when they put all your income and tax details together. They will send you a P800 if they find you have paid too much or too little tax.
The P800 shows your income from employment, pensions and taxable state benefits (for example, the state pension). Sometimes it may include small amounts of other income. It also includes the allowances and tax reliefs that HMRC think you are entitled to, and a breakdown of what tax you owe against what you have actually paid.
Note that the P800 applies to tax only and not National Insurance contributions (NIC), as NIC is calculated each pay day and not recalculated at the end of the tax year.
For guidance on what to do if your P800 shows you have overpaid tax, see our page What if I pay too much tax?.
When will I get my P800?
Normally P800s are issued over the summer months – so they are issued in 2023 for the tax year 2022/23 that ended on 5 April 2023.
Will I get a P800 calculation?
HMRC send out P800 calculations every year, most of which are generated automatically by their computer systems.
In many cases, too much or too little tax is paid simply because of the way the PAYE system works and no-one is ‘at fault’. But sometimes there will have been an error. The guidance that follows aims to help you to identify the reason why the tax you paid may not match the total amount you owe and the action you should take.
You do not necessarily get a P800 tax calculation each year. If you fill in a tax return you should not receive a P800 calculation, as you are within the Self Assessment system and any overpayment or underpayment of tax should come to light once the tax return is processed. If you do receive one, see our question below, What if I get a P800 but I am supposed to be completing a tax return?.
HMRC normally only send you a P800 calculation if they think that you have paid too much or too little tax during the tax year. You should always check the P800 calculation carefully, before accepting a refund or paying any tax demand. Sometimes HMRC get their numbers wrong, for example, they may include income twice or miss out income.
What if I do not get a P800 calculation?
First of all, you should ask yourself whether you think you may not have paid the correct amount of tax. You could check this by, for example, checking your coding notice and considering any other taxable income you might have had. Unless HMRC have all the relevant information, they may have had to use estimates in your tax code, which may mean that the tax you have paid is not correct.
If you think you have paid the wrong amount of tax, but you have not received a P800 calculation, you should contact HMRC, explain why you think you may have paid the wrong amount of tax and ensure they have your correct address on their records. HMRC should then arrange to issue the P800 calculation (and issue any refund, if one is due).
⚠️ It is important to make sure that HMRC have up to date personal details for you at all times. GOV.UK gives details on how to tell HMRC about a change in personal details.
What if I get a P800 calculation but I am supposed to be completing a tax return?
If you normally complete a tax return, but you receive a P800 calculation, do not worry – this is probably just an administration error by HMRC. You should inform HMRC of the error, but then prepare and submit your tax return as normal.
If you do not point out the error to HMRC and the P800 calculation shows that some tax is payable, HMRC may contact you in connection with the payment of the tax when you will be submitting a tax return anyway. If, as a result of the P800 calculation, you received a refund, you need to include the amount as a provisionally received refund on the tax return form itself, (in box 1 on page TR6 if filling in the paper form, or the equivalent box if filing online).
It is important to remember that the P800 calculation may not include all your income. As your overall tax liability can only be known once your income from all sources is added together, the calculation based on your tax return will be treated as the final liability, instead of the P800 calculation.
If you need to complete a tax return for the first time, you need to register for Self Assessment by 5 October following the end of the tax year for which the return is required. As HMRC start issuing P800 calculations from around June for the tax year ending on the previous 5 April, you may receive one before you have registered for Self Assessment. You should not assume that HMRC have looked at your tax affairs just because you receive a P800 calculation. For more information on Self Assessment, look at the page Do I need to complete a tax return?.
How do I check my P800 calculation?
HMRC send notes with the P800 calculation to help you check it. Points to look out for are:
- Estimated figures
HMRC might have used estimated figures in the calculation, but not made it clear that they are estimated. Compare all figures to your own records – for example, P60s and P45s from employers and pension payers, P11Ds, and bank and building society statements showing savings interest paid. Pay particular attention to any amounts shown for taxable state benefits such as new-style jobseekers allowance and employment and support allowance.
HMRC sometimes also agree to tax through your PAYE code small amounts of untaxed income that you may have, without you having to fill in a tax return each year. This might apply to rental income or some types of savings interest, for example. HMRC will probably have used an estimate of the income to work out your PAYE code for the year and may have used the same figure in the P800 calculation. Check the amount that HMRC have used is still correct and tell them if it needs changing or if it is no longer relevant, for example, if you have stopped getting that type of income.
- Combined figures
HMRC might add together more than one source of income in a single line on the calculation. The main items that may be combined are likely to be taxable state benefits or savings income and you may have to contact HMRC to obtain a full breakdown of those figures, although you may be able to check them in your Personal Tax Account.
- Spot what might be missing
This can be tricky, as it is easier to check what is on the form than to work out what is not there. But HMRC might not know about some things that could affect your tax calculation.
For instance, you should tell HMRC if you have made pension contributions to a relief at source scheme or Gift Aid donations, particularly if you are a higher rate taxpayer – that is, your calculation shows some tax due at 40%.
If you are a Scottish taxpayer and you pay tax at the intermediate, higher or top rates of tax (21%, 42% and 47% respectively), you should tell HMRC about pension contributions to a relief at source scheme or Gift Aid donations you have made.
If you are in receipt of a taxable state benefit, the Department for Work and Pensions (DWP) should tell HMRC about it. But DWP do not operate PAYE on taxable state benefits in the same way as employers or pension providers, so you may not have paid the right tax overall by the end of the tax year. You should check that the correct amount of taxable state benefit for the year is included in your P800 tax calculation.
If you are not sure whether or not your benefits are taxable, check on our state benefits page.
- Can you claim any deductions or expenses?
- Can you claim any other allowances?
You might be entitled to more allowances than HMRC have included on the calculation. For example:
- you may be eligible for the marriage allowance if both you and your spouse or civil partner do not pay tax at a rate higher than basic rate;
- you might have become entitled to the blind person’s allowance – which you do not have to be completely blind to claim;
- your spouse or civil partner might have become entitled to the blind person’s allowance and they can transfer any unused amount to you if they do not have enough taxable income to set it against.
- Have you been given allowances which you are no longer entitled to?
Equally, you might have lost entitlement to one or more of the above allowances, so your tax calculation could be wrong if HMRC have not taken account of this fact.
The same could apply if you had an extra amount included in your PAYE code, for example, certain expenses that were deductible against your employment income, but are no longer allowable because you have stopped incurring them or changed jobs.
- What rate of tax am I paying?
Most people on low to average earnings pay tax at the basic rate of 20%. See our page, What tax rates apply to me?
Note that Scottish taxpayers may have different tax rates and bands applied to some of their income.
- Did you have an extra pay day in the tax year?
Sometimes, if your employer pays you weekly, they may pay you 53 times in the year instead of the standard 52 weeks. If this happens to you, the PAYE system rules mean that you will also be given an extra week’s worth of tax-free allowances to set against the income, so that your take home pay is not adversely affected. This means that over the tax year, you will receive more tax-free pay than the standard personal allowance for the year so you might not pay enough tax in the year. On your P60 the ‘week 53 indicator’ should be ticked. This is not a mistake by your employer, the PAYE system operates in that way.
What do I do if I owe some tax?
If your P800 calculation shows that you owe tax, you usually have to pay this tax to HMRC. If that is the case but you cannot afford to do this in one lump sum, you might have options as to how you pay it back – for example, spreading it over a period of more than one year.
This is considered in more detail below in our question If I do need to pay the tax, how will HMRC collect the underpayment? but first, it is important to check that the figures on the calculation are correct.
If you agree with the P800 calculation, you should try to understand why you did not pay enough tax. This is important in working out whether you fall into one of the limited categories in which you can argue that you should not have to pay the bill. Consider the three questions below.
- Did my employer or pension provider make a mistake?
The underpayment could have arisen due to your employer or pension payer not operating PAYE correctly. This could happen in a number of ways, for example:
- your employer may not have applied a tax code that HMRC sent to them;
- you started a new job in the tax year and gave your new employer your Starter Checklist that indicated that code BR should be used (as it was a second job). However, they did not use the code – they just put you on a standard 1257L code (standard for 2022/23). This means that you would have been given the benefit of extra personal allowances and would not have paid enough tax, leading to an underpayment for the tax year.
If this is the case, HMRC should first seek the tax from the employer or pension payer, not from you.
If you think this might apply to you, read our page on employer or pension payer error.
- Did HMRC make a mistake or fail to use information to get my tax right?
The underpayment might have arisen because HMRC failed to make timely use of information about you, which they had in their possession. In such cases, you can consider asking HMRC to write off the tax in line with the practice contained in Extra-Statutory Concession A19 (ESC A19). If HMRC agree to this, you no longer have to pay the underpayment of tax.
ESC A19 usually only applies to underpayments for tax years ending more than 12 months ago – for example, you cannot normally use ESC A19 to ask for tax owing for 2022/23 to be written off if HMRC are advising you of the underpayment in, say, June 2023.
However it may be useful in situations like the following.
You began to receive an annuity payment from a personal pension of £2,000 in March 2020 and it was paid annually every March thereafter. HMRC were notified of the payment by the payer of the annuity by the end of April each year, so the amount received in March 2020 was reported to HMRC in April 2020 and so on, in line with the reporting obligations of the annuity payer. HMRC made no attempt to tax the annuity through your tax code. In 2023 HMRC send you a P800 tax calculation, attempting to collect the unpaid tax from 2019/20. ESC A19 says that HMRC should have done something with the information they received by the end of the tax year after the tax year of receipt. HMRC received the information in April 2020, so in the 2020/21 tax year. This means that they should have tried to collect the tax before 5 April 2022.
However, if HMRC have persistently got something wrong year after year, ESC A19 does provide for the tax to be written off for all years up to and including 2022/23. So, if you underpaid tax in earlier tax years, and an underpayment in 2022/23 occurred for the same reasons, ESC A19 might apply – this depends on your individual circumstances.
If you think any of the above might apply to you, read our separate page on Extra-statutory Concession A19.
- Was I misinformed by HMRC?
HMRC set themselves high standards and if they fail in maintaining those standards they may make a payment of compensation for costs or difficulties you have incurred.
If you are not entirely happy that HMRC have done everything correctly, then you should read our page on Complaining about misleading information from HMRC.
If I do need to pay the tax, how will HMRC collect the underpayment?
If, after considering the above, you decide you are not within one of the limited circumstances that enable you to challenge your underpayment, or if you have made such a challenge and found you can take your case no further, you will have to agree with HMRC how you will pay the tax.
If you receive a form P800, you should not be in Self Assessment and therefore HMRC will usually try to collect any tax due through PAYE coding adjustments.
If your form P800 for 2022/23 shows you owe tax of less than £3,000, then HMRC will try to collect the tax from your future employment income rather than collecting it in a lump sum. (If your income is more than £30,000, HMRC may collect more than £3,000 from your future employment income.) This is sometimes known as 'coding it in'.
Based on your current employment, HMRC will estimate whether you are likely to have sufficient income so that extra tax can be deducted under PAYE in 2023/24 or 2024/25 (over and above what you need to pay for the particular tax year), bearing in mind that tax deductions must not usually take more than 50% of your wages.
HMRC will usually try to collect the underpayment in one tax year, but if your P800 was issued late in the tax year, they may spread collection over more than one tax year. Details of how the amount is to be collected should be shown on the form.
⚠️ Note: HMRC operate dynamic coding practices. This means that if they become aware of an underpayment arising during a tax year, they may adjust your tax code part way through the tax year in order to collect some or all of the extra tax due. This may mean that no underpayment or a smaller underpayment arises, which would then be reflected in the form P800 for that tax year.
If HMRC cannot collect the tax through your PAYE code, because, for example, you have left the UK or are not working, they will contact you about arranging payment another way.
If you do not respond to HMRC, or cannot reach an agreement with HMRC as to how the tax due will be paid, HMRC are likely to issue you with a Simple Assessment. This will contain similar information to that contained in the form P800, but creates a legal obligation on you to pay the tax. This means that if you do not pay the tax due or make acceptable arrangements with HMRC to pay the tax over a period of time, HMRC can take enforcement action to try to collect the tax by the use of debt collectors, for example.
The various ways to settle a P800 tax bill are explained on GOV.UK.
If you have a P800 tax bill that has not been paid and so you have been put into Self Assessment or you have been required to send in a Self Assessment tax return for another reason, see our sections on Self Assessment and how to pay Self Assessment tax for further information.
What if I cannot afford to pay the tax?
If collection of the tax owed via your PAYE code or by making a payment directly to HMRC will be difficult for you financially, contact HMRC as soon as possible to discuss what other options you may have. You may be able to arrange to have the tax coded over a longer period or make a time to pay arrangement to pay in instalments. There may be an interest charge if you spread the payments.
The longest that HMRC are likely to spread the repayments over, either via your PAYE code or by instalments, is three years, although in exceptional circumstances they may agree to a longer period. The actual agreement you can make with them is likely to depend on your circumstances and how much you can afford to pay. You will usually have to agree to make the payments under direct debit from your bank under a time to pay arrangement.
If paying back the tax is likely to cause you extreme hardship, you should make this clear to HMRC when you contact them and provide as much detail as possible as to your current situation. For example, this might apply if you are on means-tested benefits with no savings and cannot foresee ever being able to repay the tax, or you have become very ill and so cannot work for a significant period of time. You will usually have to provide some evidence of your circumstances, but HMRC might then agree to put off collecting the tax for a period to allow time for your situation to improve.
You can get more detailed advice on what options there are if you cannot pay your tax from the tax charity TaxAid including tips on arranging a time to pay agreement and what to do if HMRC take enforcement action.
What if I am on means-tested benefits?
If you are on a low income, it is possible that the extra tax you are paying will affect your entitlement to means-tested benefits. You should contact JobCentre Plus, The Pension Service and/or your local authority to advise them of your reduced income due to the tax you are paying and ask how it affects your entitlement. Alternatively you can seek a benefits review from a charity providing welfare rights advice or you could use one of the benefits calculators referred to on GOV.UK.
For example, if you are a low-income pensioner, and you find that extra tax repayments will cause you financial hardship, you should investigate whether you are entitled to claim pension credit – or extra pension credit, for existing claimants – as entitlement to this benefit is calculated on your after-tax income.
⚠️ Note, however, that paying more income tax does not make any difference to your tax credits entitlement.
What if I receive a calculation for a tax year before 2022/23?
If the P800 calculation shows that you have not paid enough tax, check the year carefully. Since 6 April 2023, HMRC have not been able to go back further than 2019/20 unless the loss of tax was brought about by careless or deliberate action on your part. So, any calculation for the year to 5 April 2019 or earlier is now likely to be out of time and you should not have to pay any tax shown as due.
Where can I find more guidance and help?
How do I contact HMRC?
Contact HMRC if:
- you think your P800 calculation is wrong – you must let HMRC know if you think they have repaid you too much;
- you need to claim extra tax reliefs or allowances;
- you need to ask for a full explanation if you do not understand the calculation.
You can telephone HMRC’s Income Tax Helpline. When telephoning, have the P800 calculation to hand, as HMRC might ask you to confirm your National Insurance number and answer some other questions before discussing it with you. See also our general guidance on what to do when telephoning HMRC.
If you prefer, you can write to HMRC at the postal address on the calculation. HMRC might also ask you to write to them to claim extra reliefs or allowances. You can find the address to write to on GOV.UK and we also suggest you read our general guidance on writing to HMRC.
Other sources of help
You can seek independent advice from a tax adviser – we tell you how you can find an adviser, including through the tax charities, in our Getting Help section. You should consider seeking such help if you think you have discovered a problem that means you have not been paying enough tax which could mean you face a tax bill and penalties.