HM Revenue & Customs (HMRC) has started its annual end of year reconciliation to check whether PAYE taxpayers have paid the right amount of tax in 2012-13.

HMRC said on 17 May that around 85 per cent of people in PAYE would have paid the right amount of tax for the year.

But anyone who has paid too little or too much tax under PAYE for 2012-13 will receive a tax calculation on form P800, with an explanation of the details.

HMRC said it expected that the automated process would be completed by October 2013, and there is no need to contact HMRC.

People who have paid too much tax will receive a cheque, usually within 14 working days of their receiving their P800.

Where people have paid too little, the underpayment will in most cases be automatically collected through their 2014-15 annual tax code over 12 months.

Where this is not possible, HMRC will contact the taxpayer, detailing their options for paying the tax outstanding. HMRC added: “If you get a tax calculation, check it to make sure you agree with the information included.”

The Low Incomes Tax Reform Group, a Chartered Institute of Taxation initiative, has issued a range of guidance for PAYE taxpayers, including a guide to ESC A19, an extra-statutory concession under which HMRC will sometimes write off arrears of tax and a guide to when HMRC should investigate whether someone’s employer or pension payer should be asked to pay tax arrears rather than the individual.

The group said: “Crucially, if taxpayers are claiming that ESC A19 applies, they should not be tempted to pay off any PAYE underpayment before their application has been considered.

“If they do clear it, 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 taxpayers do decide to pay something towards the arrears, they must make sure HMRC know that it is a payment on account and made without prejudice to the A19 claim.”

If you are unsure whether you are paying too much or too little tax then it is always best to seek expert advice at the earliest opportunity. At Milsted Langdon, our tax team can help establish whether you are paying the right amount of tax and, if not, liaise with HMRC on your behalf. To find out how we can help you, please contact us.

Link: Understanding and checking a P800 tax calculation

Link: Low Incomes Tax Reform Group guidance