What if I do not pay enough tax?

Updated on 6 October 2019

Employment

On this page, we explain what happens if you do not pay enough tax, and in particular, what to do if HM Revenue & Customs (HMRC) send you a tax calculation (a P800) for a tax year.

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.

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 lose a civil partner;
  • 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.

Normally they are issued over the summer months – so they are being issued in 2019 for the tax year 2018/19 that ended on 5 April 2019.

These forms show your income from employment, pensions and taxable state benefits (for example the state pension). Sometimes they may include small amounts of other income. They also include 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.

For a brief overview, you can look at our factsheet on P800s.

For guidance on what to do if your P800 shows you have overpaid tax, see our page What if I pay too much tax?.

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Will I get a P800 calculation?

HMRC send out P800 calculations every year, most of which are generated automatically by their computer systems. This process is by no means perfect, but it is a normal part of the PAYE calendar. 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.

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.

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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.

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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, usually in box 1 on page TR6.

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?.

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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:

1. 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 jobseekers allowance and employment and support allowance, for example.

HMRC sometimes also agree to tax small amounts of untaxed income that you may have through your PAYE code, 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.

2. 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 for example, 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

3. 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 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, you should tell HMRC about pension contributions or Gift Aid donations you have made if you pay tax at the intermediate, higher or additional rates of tax (21%, 41% and 46% respectively).

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.

Take particular care if you have received employment and support allowance because:

  • the contribution-based version of the benefit is taxable, but
  • the income-related version is not taxable.

4. Can you claim any deductions or expenses?

HMRC might not know about certain amounts you are entitled to claim as a deduction from your wages. Some common claims are for using your own car for business travel and other employment expenses.

5. 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. Note this allowance is only available from 2015/16;
  • 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;
  • you might have got married or registered a civil partnership and become entitled to married couple’s allowance – but this only applies if one or both of you was born before 6 April 1935;
  • you might be entitled to a personal allowance as a non-resident of the UK. This should appear automatically on your P800 calculation if you are an EEA national, but if you are not an EEA national, you may still be entitled to a personal allowance under the terms of a double taxation agreement.

6. 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.

7. What rate of tax am I paying?

Most people on low to average earnings pay tax at the basic rate of 20%. But if you are on a low income and have some bank or building society interest, you may be entitled to pay tax at a reduced rate of 0% on some or all of that interest. Entitlement to this rate depends on your other income. Note that Scottish taxpayers may have different tax rates and bands applied to some of their income.

8. 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, they may also give you 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.

See our news article about this issue in relation to the 2018/19 tax year.

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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, you might have options as to how you pay it back – for example, spreading it over a period of more than one year.

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.

Questions to ask:

Did my employer or pension provider make a mistake?

It is possible that the underpayment has arisen due to your employer or pension payer not operating PAYE correctly. For example, they may not have applied the tax code that HMRC sent to them. If this is the case, HMRC should first seek the tax from the employer or pension payer, not from you.

For example, you started a new job in 2018/19 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 1185L code (standard for 2018/19). 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 you think this might apply to you, read our full guide 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 under their 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 2018/19 to be written off if HMRC are advising you of the underpayment in, say, June 2019.

However it may be useful in situations like the following. You had a company car in 2015/16 and your employer sent form P11D to HMRC in July 2016 (on time). HMRC made no attempt to tax the company car benefit through your tax code. In 2019 HMRC send you a P800 tax calculation, attempting to collect the unpaid tax from 2015/16. 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 form P11D in 2016/17. This means that they should have tried to collect the tax before 5 April 2018.

However, if HMRC have persistently got something wrong year after year, they do have the power to write the tax off for all years up to and including 2018/19. So if you underpaid tax in earlier tax years, and an underpayment in 2018/19 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 full guide 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 write off the tax, but be aware that this is only likely to be in a few cases.

If you are not entirely happy that HMRC have done everything correctly, then you should read our misleading HMRC information and complaints guide.

But what if you do have to pay the underpaid tax?

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.

We set out the considerations below:

How will HMRC collect the underpayment?

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 2018/19 shows you owe tax of less than £3,000, then HMRC will try to collect the tax t 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, they will estimate whether you are likely to have sufficient income so that extra tax can be deducted under PAYE in 2019/20 or 2020/21, (over and above what you need to pay for the particular tax year) bearing in mind that tax deductions must not 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.

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 for underpayments relating to the 2016/17 tax year onwards, This ‘letter’ 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.

If you do not agree with the Simple Assessment, you can first query it. You must do this within 60 days of receiving it, setting out your reasons why you do not agree with it. At this stage you can also ask for some or all of the tax that is shown as due to be postponed (in other words that it should not be collected now). You can make your query by phone but you may find it easier to keep a record if you write to HMRC. HMRC will then respond to your query.

If you still do not agree their figures you can appeal against the Simple Assessment but be careful because you only have 30 days in which to make your appeal. As for any query, you can make your appeal by phone, but you may find it easier to keep a record of your appeal if you write to HMRC. You should state in your appeal why you think the figures are incorrect and provide correct ones.

Remember you need to quote your tax reference that is shown on your Simple Assessment, in any conversations or letters with HMRC. While the tax due is in dispute, in other words you have not agreed the figures with HMRC, HMRC might agree not to collect any or all of the tax shown as due.

Normally the tax due as a result of a Simple Assessment will be due by 31 January following the end of the relevant tax year. A Simple Assessment issued for the tax year 2018/19 will therefore show tax due to be paid by 31 January 2020.

You can find more information on how to pay HMRC in our news piece How to pay the tax bill shown on your form P800.

If, exceptionally, 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 repay the tax?

If collection of the underpayment via your PAYE code or payment directly to HMRC will be difficult for you financially, contact HMRC as soon as possible to negotiate. You may be able to arrange to have the tax coded over a longer period or to pay in instalments. There may well 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.

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.

There is more information on what to do if you cannot pay your tax in the tax basics section.

What if I am on means-tested benefits?

If you are on a low income, it is quite 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 Citizens 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.

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What if I receive a calculation for a tax year before 2018/19?

If the P800 calculation shows that you have not paid enough tax, check the year carefully. Since 6 April 2019, HMRC have not been able to go back further than 2015/16 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 2015 or earlier is now likely to be out of time and you should not have to pay any tax shown as due.

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Example letters and guides

There are two versions:

a. pdf files – can be read and printed

  1. LITRG example letters to HMRC regarding tax repayments, 2018-19
  2. LITRG employer or pension payer error guide, 2018-19

  3. LITRG guide to Extra Statutory Concession A19, 2018-19

  4. LITRG guide to complaining about misleading information from HMRC, 2018-19

  5. Example letters regarding tax underpayments – adjustments and explanation requests, 2018-19

b. Rich text format files – these are Word files for you to edit and use the example letters, for your personal use only, once downloaded

  1. LITRG example letters to HMRC regarding tax repayments, 2018-19
  2. LITRG employer or pension payer error guide, 2018-19
  3. LITRG guide to Extra Statutory Concession A19, 2018-19
  4. LITRG guide to complaining about misleading information from HMRC, 2018-19
  5. Example letters regarding tax underpayments – adjustments and explanation requests, 2018-19

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Where can I find more guidance and help?

How do I contact HMRC?

You need to 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.

Always keep a record of:

  • the date and time of your call;
  • the name of the person that you spoke to; and
  • a note of what you said and what HMRC said to you.

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.

Whenever you write to HMRC:

  • include your National Insurance number and the HMRC reference taken from the P800;
  • include your full name and address;
  • either:
    • explain what you think is wrong and why;
    • explain what additional reliefs or allowances you think you are entitled to; or
    • ask what figures you require an explanation of;
  • sign and date the letter in ink;
  • keep a copy of the letter and any supporting information you send with it;
  • clearly state if any enclosed documentation is original and you wish it to be returned to you;
  • obtain proof of postage
  • make a note to follow up with HMRC if you have not heard anything within a month, so that you can check your letter has been received and is being dealt with.

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 and that could mean you face a tax bill and penalties.

If you are on a low income and cannot afford to pay for advice, there are two charities, which could offer guidance on how to check the figures and explain how the calculations work. In some circumstances, they might also be able to help you to resolve queries directly with HMRC.

Tax Help for Older People is a charity offering free tax advice to older people who are on a low income.

TaxAid helps low-income taxpayers, with problems that they cannot resolve with HMRC and who cannot afford to pay a professional tax adviser.

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