There are several reasons you could have underpaid your tax. If HMRC has demanded more tax, read our guide to what you should do to fix the problem.
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Check your tax code
Tax errors are often the result of getting the wrong tax code.
Normally, this is because your circumstances have changed during the tax year, or are more complex than normal.
Examples would include if you have more than one job, or more than one employer.
Your tax code shows the amount of tax-free personal allowance you’ve been given.
For 2012-13 this was £8,105 for most people, producing a tax code of 810.
In 2013-14 it’s £9,440, making the standard code 944.
For 2014-15, it's £10,000, making the standard code 100.
For 2015-2016, it's £10,500, making the standard code 105.
In 2016-17, it's £11,000, making the standard code 110.
Not everyone gets the same, however. State pension, which is taxable but paid gross (no tax deducted), can complicate matters.
This would result in a lower allowance and a lower code.
- Always check your tax code first
- In some circumstances you can ask HMRC not to pursue the tax - this is known as Extra Statutory Concession A19
- See how to complain about poor services or delays from HMRC
When PAYE tax might be written off
In some circumstances you can ask HMRC not to pursue you for tax.This is known as Extra Statutory Concession A19.
This Concession allows HMRC to give up income tax and capital gains tax where they have failed to make proper or timely use of information.
However, tax will normally only be written off in the following circumstances:
- where you were notified of arrears more than a year after the end of the tax year in which HMRC received the relevant information
- if you were notified of an overpayment after the end of the tax year following the year in which a tax refund was made from HMRC, and you could have reasonably believed you paid the right amount of tax
- in exceptional circumstances where HMRC fails more than once to make proper and timely use of information, and arrears build up over two whole tax years. Then, tax arrears may be given up even if the taxpayer is notified before the end of 12 months following the end of the relevant tax year
No matter what your circumstances, there's an onus on you to read notices sent to you and check that tax due has been calculated on the basis of the correct information.
There should be a contact number and address on the tax coding notice that's been sent to you, or any other communications you receive from HMRC.
See our guide on how to complain about poor service from HMRC.
HMRC penalties on self-assessment tax
Under the current penalty regime, you could incur a penalty if you don't check HMRC's assessment of what you must pay in tax if it turns out HMRC has under-assessed what you must pay.