To work out accurately if you have paid too much tax, and whether or not you are due a repayment, you will have to work out your tax liability and compare this to how much you have paid.
To start with, you will need to gather all the information about your income and tax position. This may include the following documents for the tax year:
We set out an example tax calculation and explained the steps involved in calculating your tax liability on our page, ‘How do I work out my tax?’
To work out your tax liability, you first need to calculate your taxable income. You must include the gross amounts in your calculation, that is, the amounts before tax is taken off.
You may be able to deduct certain expenses or claim allowances against your gross taxable income.
You need to calculate your tax liability using the correct rates of tax, and you can then deduct the tax you have already paid, for example, under PAYE, to work out your tax overpayment or underpayment.
For further assistance you can contact us on 01308 488066 or via the secure email link on this website. A tax adviser will check your personal situation, help you resolve it or guide you in the right direction.
Employees and pensioners have tax taken off them throughout the 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. This guide explains what to do if HMRC send you a tax calculation (a ‘P800’ or a 'PA302) for 2017/18 or earlier.
If you work or get a pension, or perhaps both. Tax is taken off under PAYE, but you should still always check your tax, even if you think everything should be straightforward.
Your tax affairs can be complicated if, for example, you:
In these and other situations, HMRC might send you a PAYE tax calculation (a ‘P800’ or PA302) after the end of the tax year if they think you have paid too much or too little tax.
HMRC now send out P800s every year and most are automatically computer-generated. 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 and this guide aims to help you to understand the difference.
Here we explain what to do if you get a P800 or PA302 calculation for 2017/18 or earlier:
Not everyone will get a P800 or PA302 tax calculation. Some people fill in tax returns, so their tax affairs will be sorted out in that way. For many others (HMRC estimate around 85% of people), PAYE works well so that you pay everything you owe during the year. But HMRC might not know everything they need to know to get your tax right, so check your position even if you don’t receive a calculation.
HMRC will send notes with the calculation to help you check it. Points to look out for are:
HMRC might have used estimated figures on 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 interest and tax deducted.
HMRC sometimes also agree to tax small amounts of income you get ‘gross’ (that is, without tax taken off) 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 (that is, you have stopped getting that type of income).
From December 2015 sources of income will be shown individually making it easier to check. However, earlier year calculations may have more than one source of income added together in a single line on the calculation. If, for example, you have more than one job or pension, you might have to add up figures from multiple P60s to arrive at the amount shown as ‘PAYE income’.
Spot what might be missing
This can be tricky, as it’s easier to check what is on the form than to work out what is not! But HMRC might not know about some things which could affect your tax calculation.
For instance, you should tell HMRC if you have made pension contributions or Gift Aid donations, particularly if either:
If you are in receipt of a taxable state benefit, the Department for Work and Pensions (DWP) should have told HMRC about it. But because the DWP do not operate PAYE in the same way as employers or pension providers, you may not have paid the right tax overall by the end of the tax year. The taxable amount of state benefit for the year should therefore be included in your P800 tax calculation.
Take particular care if you have received Employment and Support Allowance because:
Make sure you know which kind you received!
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 and business travel and other employment expenses.
Can you claim any other allowances?
You might be entitled to more allowances than HMRC have included on the calculation. For example:
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 this into account. The same could apply if you had an extra allowance included in your PAYE code, for example, certain expenses which were deductible against your employment income but would no longer be allowed after you stopped work 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%. But if you are on a low income and have some bank or building society interest, you may be entitled to some or all of your savings interest free of tax. The rules concerning savings income changed in 2016/17.
Most people’s reaction to receiving a tax repayment is “thank you very much” followed by a swift trip to the bank to deposit the cheque! But before you bank the cheque, make sure the repayment is correct, because:
Are you owed tax of less than £10 or do you need to make a claim for other tax relief from HMRC?
If you are due a repayment of less than £10, HMRC will give it to you only if you submit a claim – their computer will not automatically issue it.
Also, you might not get a calculation because HMRC’s computer shows that you are not due to receive one – that is, they do not think you owe them any tax, nor that you are due a repayment. But you could be entitled to some extra allowances or reliefs, such as those in section 1 above. In that case, you will need to write to HMRC claiming your repayment.
Earlier years’ repayments
If HMRC thought you were due tax back for any of the years , 2013/14, 2014/15, 2015/16 they have probably already sent it to you. But if not, it might be worth checking whether you are due anything back, particularly if you have discovered you have not claimed enough allowances or other tax reliefs in 2016/17 and the same applied to earlier years.
Repayment claims have time limits, so don’t delay. But do be careful – if it turns out that you have not paid enough tax in previous years, HMRC might be obliged to collect it if you prompt them to review your situation. So get your facts straight first.
Time limits for claiming repayments are
Tax year 2013/14 (year ended 5 April 2014) – you must claim by 5 April 2018
Tax year 2014/15 (year ended 5 April 2015) – you must claim by 5 April 2019
Tax year 2015/16 (year ended 5 April 2016) – you must claim by 5 April 2020
Tax year 2016/17 (year ended 5 April 2017) – you must claim by 5 April 2021
Tax year 2017/18 (year ended 5 April 2018) – you must claim by 5 April 2022
In cases of ‘official error’, HMRC might agree to issue repayments for years prior to 2013/14 under their ‘Extra-statutory Concession B41’. This says:
‘...repayments of tax will be made in respect of claims made outside the statutory time limit where an over-payment of tax has arisen because of an error by the Inland Revenue [now HMRC] or another Government Department, and where there is no dispute or doubt as to the facts.’
But such cases are rare and you would need to be able to show what went wrong and set this out in a letter to HMRC. Again, our first additional guide at the end of this article provides an example letter on ESC B41.
Most people will, unfortunately, have to pay the tax shown on their P800 calculation. 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.
But first, after checking that the figures on the calculation are correct, do try to understand why you did not pay enough tax. This is important in working out whether you fall into one of the limited situations in which you can argue that you should not have to pay the bill.
Questions to ask yourself:
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.
Read our Employer or pension payer error guide
Did HMRC make a mistake or fail to use information to get my tax right?
The underpayment could have arisen because HMRC have failed to make timely use of information about you which they have had in their possession. In such cases, you can consider asking HMRC to write off (that is, not to charge you) the tax under their Extra-Statutory Concession A19 (ESC A19).
But note that 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 2017/18 to be written off if HMRC are advising you of the underpayment in, say, June 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 2017/18. So if you underpaid tax in earlier tax years, and an underpayment in 2017/18 occurred for the same reasons, ESC A19 might apply dependent upon your individual circumstances.
Read our Extra-Statutory Concession A19 (HMRC error) guide
*Important note* about making payments towards the tax bill if you are claiming ESC A19
If you are claiming that ESC A19 applies, HMRC might still ask you to start paying towards the tax they say you owe before your case is resolved. If this happens, make it clear that you have not yet agreed that you owe it and ask them to wait until your ESC A19 complaint has been answered before you start making payments.
If HMRC are insistent that you pay something, do not repay the tax in full (as HMRC will then argue that ESC A19 cannot apply as there are no arrears of tax). If you agree to start making payments towards it, make it clear that these are only ‘on account’ and you expect them to be repaid to you if your claim is eventually agreed.
We suggest you get this agreement with HMRC in writing to protect yourself in the event of a future query. At the very least, if the agreement is made over the telephone, write down the date and time of the call, the name of the person you spoke to and what was said on the call.
Was I misinformed by HMRC?
HMRC set themselves high standards and if they fail in maintaining those standards they may write off tax (but be aware that this is only likely to be in few cases).
If you are not entirely happy that HMRC have done everything correctly then you should read our complaints’ guide.
If, after considering the above, you decide you are not within one of the limited circumstances of challenging 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 the tax will be paid.
Again, we set out the considerations below.
How will the underpayment be collected?
If you owe under £3,000 and you have sufficient income from which tax can be deducted under PAYE in 2019/20, the underpayment will be included as a deduction from your allowances in 2019/20. HMRC will try to collect the underpayment in one year. The system is changing this year so if you are unsure contact Tax Help for Older People.
If it cannot be collected through your PAYE code, you will have received the PA302 instead and that will have instructions on how to pay.
What if I cannot afford to repay?
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, although there could 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. The actual agreement you can make with them is likely to depend on your circumstances and how much you can afford to pay. For payment periods over 3 years you will probably be asked to provide your income and expenditure information.
If paying back the tax is likely to cause you extreme hardship, do make this clear to HMRC when you contact them. 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. You may have to provide some evidence of your circumstances, but HMRC might then agree to put off collecting the tax for a period or to write it off altogether.
What if I am on means-tested benefits?
If you are claiming means tested benefits ask HMRC to consider the hardship rules, they may write of the underpayment. If this fails contact Tax Help for Older People.
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.
For example, low-income pensioners who find that extra tax repayments cause financial hardship should investigate whether they are entitled to claim Pension Credit (or extra Pension Credit, for existing claimants), as entitlement to this benefit should be calculated on your after-tax income.
Note, however, that paying more income tax does not make any difference to your tax credits entitlement but might affect universal credits so you should talk the DWP benefits team .
Calculations for earlier years
HMRC are still issuing, in a dwindling number of cases, P800 calculations for earlier years – that is, for 2013/14 and before.
If it shows that you have not paid enough tax, check the year carefully. HMRC can now only go back four years, so 2014/15 is now the earliest year for which they can issue a P800, 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 2014 (the 2013/14 tax year) is now likely to be out of time.
You will need to contact HMRC if:
HMRC’s helpline number is 0300 200 3300 (textphone for those with hearing or speech impairment, 0300 200 3319). When telephoning, have the 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:
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.
Whenever you write to HMRC:
If HMRC calculate that you have underpaid tax but you think that the underpayment arises because your employer or pension payer failed to operate PAYE correctly, you have the right to challenge whether HMRC should ask your employer or pension payer to pay it instead.
Here, we aim to provide a guide to the law and advise you what to do next.
The guide is divided into the following sections:
PAYE is a three-party process, involving:
Its operation is set out in law, together with each of the parties’ responsibilities. Information can pass between all three and sometimes the system breaks down. The issue considered in this guide is whether the employer or pension payer has failed to do something they are required to do by law – for example, not acting on instructions received from HMRC or not following the correct procedure when taking on a new employee or pensioner.
When PAYE works properly and a correct code has been operated throughout the year, the tax paid should broadly equal the tax due. There can be small ‘rounding’ discrepancies of just a few pounds or pence but generally these are ignored.
Basically, those making payments under PAYE are required to follow the rules and deduct the right tax before paying the ‘net’ (after-tax) amount to the payee.
Mistakes can of course happen. Forms can get lost in the post (although these days, most exchanges between employers/pension providers and HMRC are done electronically) and there can be breakdowns in communication. It can be a very difficult task for you, the employee or pensioner, in receipt of an underpayment ‘P800’ or 'PA302' calculation from HMRC to work out why it has arisen. Usually, all you know is that you thought everything was fine until, out of the blue, you have been told otherwise.
Each of the three parties in the process could have been at fault:
In some cases, there might be a far more serious situation, where the employer or pension payer has not simply made an error, but they have been generally irresponsible in the way that they have operated PAYE or have deliberately not operated PAYE correctly.
HMRC records can often show whether or not an employer or pension payer has taken a range of steps to operate PAYE in accordance with HMRC’s instructions. HMRC should not issue a tax calculation without checking why an employer or pension payer has acted inappropriately.
You might think to ask your employer or pension payer what has gone wrong. But be very careful - this is not the role of the taxpayer and is unlikely to get a favourable (or a friendly) response. We recommend that you ask HMRC to investigate, as they are in a much stronger and better position to do so.
But when you are checking the P800 calculation, you should bear in mind the types of errors that employers or pension payers do make:
Note that prior to 2015/16, PAYE sources of income are grouped together on a P800 under the description PAYE income. You may need to add up the information on several P60's or P45's to arrive at the figure produced by HMRC. From 2015/16 income sources should be listed individually and should match your P60/P45 for that source.
If you suspect any of the above situations apply to you or that there has been some other error by your employer or pension payer, either deliberately or perhaps by way of poor administration, you should contact HMRC. You can telephone them, or alternatively write a letter.
HMRC’s guidance says that you should give details of what you think has gone wrong. You might of course not understand the detail, but still feel something has gone wrong which is not your fault. In that case, we recommend you ask HMRC if they have considered whether your employer or pension payer is in any way at fault. If they do not feel that there has been any error on the employer or pension payer’s part, you should get HMRC to explain why the underpayment has arisen. (It is unlikely that you have will have received an adequate explanation on the P800 issued by the computer – it might just say something bland like ‘The reason for the underpayment is given on the enclosed sheet’, but the only other sheet is the calculation itself.).
It is up to HMRC to review the situation and then tell you of their decision, which will be one of the following:
In the latter two situations, HMRC will need to issue a formal notice (a ‘Direction’) to both you and your employer or pension payer that they think you should pay the tax. You then have a right to appeal in writing to HMRC within 30 days against their Direction, either by way of HMRC’s internal review system or an independent tribunal. More information on appeals generally can be found in the ‘When things go wrong’ section of this website.
It is also possible that your tax underpayment has arisen for more than one reason – in which case, HMRC might consider that part of it is due to an employer or pension payer error, and part for other reasons. They could then treat each part of the tax bill differently – for example, agreeing to pursue your employer or pension payer for part of it and still asking you for the balance.
We would not be surprised if by now you are confused.
The key point is that you make contact with HMRC either by telephone or in writing to raise your concerns over the calculation you have been issued, and not to be easily deterred if you cannot get through or are initially declined what seems fair treatment.
When contacting HMRC, keep a note of your conversation and copies of any correspondence and papers sent to them, together with proof of postage.
As noted above, you do have rights and should not be afraid to exercise them. Indeed, LITRG campaigned successfully back in 2003 for HMRC to change the law so that appeal rights were included for taxpayers where their employer or pension payer has made an error.
If HMRC have delayed using information in their possession, and this results in you paying too little tax, HMRC will sometimes write off the arrears of tax under Extra-Statutory Concession (ESC) A19. This guidance is to help you consider whether you can challenge HMRC under this policy.
Extra-Statutory Concession A19 is a practice developed by the former Inland Revenue (now HMRC) to cover situations where an error or administrative failure of theirs resulted in someone paying too little income tax or capital gains tax.
Devised to ensure fairness for taxpayers where the strict law says that they owe tax but it would be unfair to pursue payment, its use can alleviate worry and concern for vulnerable taxpayers presented with large, unexpected demands for arrears of tax.
The concession provides for tax to be written off (that is, not collected) in certain circumstances. It has a factual element and a subjective element.
It is generally easy enough to work out whether the purely factual conditions are satisfied. Arrears of tax must have arisen because HMRC have delayed in using information about you which they have had in their possession, and the arrears must usually be at least one year old. Sometimes, the concession can be used to write off arrears which are less than a year old where HMRC’s failure to make use of information has been persistent.
HMRC have agreed to treat P14 information from employers as relevant for the purposes of the 2012/13 tax year onwards, though they did not treat it as such for earlier years.
The subjective element is less easy to satisfy: whether HMRC write off the tax depends on whether they think it was reasonable for you to have believed your tax affairs were in order (see heading 3 below).
You can ask for collection to be suspended while you await the outcome of an investigation.
So when might you be justified in asking for your tax to be written off under ESC A19?
First, bear in mind that 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 2017/18 to be written off if HMRC are advising you of the underpayment in, say, June 2018.
However, if HMRC have persistently got something wrong year after year, we would expect them to consider writing the tax off for all years up to and including 2017/18 unless they corrected the error before the end of the 2017/18 tax year. So if you underpaid tax in earlier tax years, and an underpayment in 2017/18 again occurred for the same reasons, A19 might apply. It might help to ask yourself:
For ESC A19 to apply, it must have been reasonable for you to have believed that your tax affairs were in order. The question is not whether you did in fact believe that your affairs were in order, but whether it was reasonable for you to believe they were.
Importantly, this ‘reasonable belief’ test should be applied by looking at you as an individual. HMRC’s internal guidance requires their officers to consider the following factors when applying the reasonableness test:
The Manual instructions conclude: ‘if the issue is so finely balanced that it is hard to form a judgement, always give the taxpayer the benefit of the doubt’.
So what factors should be considered? Drawing on the criteria set out in the HMRC official manual, some examples are:
If you think your situation fits in with the concession, make contact with HMRC as soon as possible – their telephone number and address will be given on the notes accompanying the tax calculation you have received. If you can't find it, here it is 0300 200 3300.
If you think they have made mistakes and you have evidence to support that, set out the details in your letter or when you telephone. Whenever you contact HMRC, keep a record (that is, keep a note of the date and time of telephone calls, to whom you spoke and what was said; and keep copies of any letters and documentation sent to HMRC with proof of postage).
Make sure you mark your letter as claiming ESC A19 – we have provided an example letter in the appendix below to give you an idea of what to write, subject to tailoring it to your own circumstances as appropriate.
We also suggest you make it clear when you contact HMRC that you wish them to suspend any action to collect the tax they say you owe while they review your case.
HMRC will, in due course, come back to you with their decision. There are several possibilities here:
If they decline A19 or only allow it in part, you do have other options to get your case reviewed further. First, you can submit a formal complaint asking to have your case reviewed again, giving details of why you feel you have received inadequate help and care from HMRC.
Do not succumb to temptation to pay off any PAYE arrears before your A19 application has been considered. The reason is that if you clear the arrears, HMRC will claim that there are no longer any arrears in respect of which ESC A19 can apply, and refuse to consider the concession. If you do decide to pay something towards the arrears, make sure HMRC know that it is a ‘payment on account’ and made without prejudice to your A19 claim. We suggest you do this in writing.
Read our ‘How to complain’ guide on the ‘When things go wrong’ section of this website. This explains more about how to complain to HMRC and onwards to the Adjudicator and Ombudsman if you are still not satisfied.
The only route to the courts in A19 cases is to seek what is called a ‘Judicial Review’, but unfortunately this is beyond the means of most ordinary taxpayers, particularly as it carries with it the downside of HMRC potentially seeking to recover their costs from you should your case fail. If you do wish to consider this route, you would need to take advice and act quickly as there are strict time limits to request the review which apply from the date of HMRC’s decision.
Extra-statutory Concession A19 - The full text of the concession is as follows:
Arrears of income tax or capital gains tax may be given up if they result from HMRC’s failure to make proper and timely use of information supplied by:
Tax will normally be given up only where the taxpayer:
In exceptional circumstances arrears of tax notified 12 months or less after the end of the relevant tax year may be given up if HMRC:
HMRC’s guidance to customers on their website: https://www.gov.uk/hmrc-did-not-act
HMRC’s internal staff guidance can be found in their procedural manuals. It is too long to reproduce here, but if you wish to read it all, you can find it on their website: http://www.hmrc.gov.uk/manuals/pommanual/paye95000.htm