The Pay As You Earn (PAYE) system relies on employers to deduct tax and National Insurance Contributions from employees correctly. If an employer deducts the wrong amount of tax or NI, or if they report incorrect information to HMRC, it can cause problems.
We look at some commonly asked PAYE related questions. You might also like to download our guide to PAYE using the button below.
New to employing staff and unsure where to start with PAYE?
What happens if my employer uses the wrong tax code?
Not using the right tax code inevitably leads to errors in PAYE deductions which can, in turn, result in overpaid or underpaid tax.
HMRC tend to approach the employee directly to collect any underpaid tax though, which can be an unpleasant surprise. If the underpayment is as a result of employer error, it’s their problem to fix (even if they’re a bit reluctant to acknowledge this).
You can ask your employer to review their records, or HMRC can check them to identify the source of the mistake. Even if the error is caused by your employer, HMRC will still expect you to pay the tax that is owed though it may be possible to arrange time to pay.
Does everyone get a P800?
Not everybody receives a P800 – the name given to the tax calculation which shows your taxable income and tax paid. A P800 is only used to notify people if the wrong amount of tax has been paid, whether that’s too much or not enough.
If you’re registered for Self Assessment then you won’t receive a P800 even if the wrong amount has been paid. Instead, your Self Assessment tax bill will be adjusted to reflect the new calculation.
Who do I tell if my tax calculation is wrong?
You should let your employer know about any tax mistakes as soon as possible, as it will be up to them to correct it. If you do get a tax query from HMRC, and you’re self-employed as well as working for an employer, it’s well worth double-checking where the mistake was made, before asking for a meeting with HR!
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About The Author
I'm a Payroll Manager with a degree in Mathematics, responsible for overseeing every aspect of payroll for our clients. In my spare time, I love to travel and going to gigs.
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