Tax Mess

It appears that a P800 is not just a mobile phone, but also an HMRC form. Today a significant number of people have received a P800 from HMRC which outlines their taxation for the last two tax years (2008/09 and 2009/10). This is due to an error in calculating the tax due via the PAYE system (for employed people). Many have underpaid, some have overpaid their tax.

As you know, tax is not optional, although in certain circumstances one might conclude that it is (if you were to believe everything that the financial services industry says). So it is important that you deal with the matter quickly if you are the recipient of such a form.

If you have paid too much tax, HMRC will automatically send you a repayment, usually within a week or so.

If you have paid too little tax and the amount owed to HMRC is under £2,000, this will automatically be reflected in your new tax code for 2011-12. This spreads the collection of the underpayment throughout the year. If the result is that this causes financial hardship, you are able to ask HMRC to collect the balance over a longer period of time.

If the amount owed more than £2,000, expect a letter asking for full payment. It is possible to agree to spread the payments, but it is likely that HMRC will want this cleared up before 5th April 2011. If you need assistance because of the amount HMRC have a hotline, which doubtless is fairly busy - 0845 3000 627.

For further information have a look at the HMRC site.

A new computer is to blame for the error (naturally!). In this increasingly cost saving society, there are new calls for an overhaul to the PAYE system. I would imagine that the postal cost alone must be fairly enormous - particularly as tax coding notices often change several times in the space of 12 months.... I sense change and the inevitability of further new computer system errors.