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PAYE tax calculations start to land

16 June: HMRC has started to issue annual PAYE tax calculations for 2019/20, prioritising cases where a refund is due. ICAEW highlights the importance of checking the calculations and requesting electronic payment.

HMRC has begun the annual reconciliation of individual’s PAYE records for 2019/20 and the first calculations (P800 tax calculations and PA302 simple assessments) will start to arrive this week.

Annual reconciliation is the process that finalises the income tax liability of individuals who have a PAYE record in NPS (HMRC’s National Insurance and PAYE service), but who are not required to submit a self assessment tax return.

The process is expected to be substantially completed by November 2020, but cases that require manual intervention may be issued up to March 2021. This year, as part of its response to the COVID-19 pandemic, HMRC will prioritise refunds before starting to process underpayments from mid-July.

HMRC has rejected reports that it might cease sending agent copies of PAYE tax calculations, confirming that, as in previous years, agents will receive copies of their clients’ calculations.

Anyone receiving a calculation should check it carefully as, historically, errors have been fairly common. The following items in particular should be checked:

  • Employment and pension income and tax deducted (including a check for omissions and duplications).
  • Other taxable income (eg, rental income, dividend income and interest income below the threshold for needing to file a self assessment return).
  • Employment expenses.
  • Allowances such as marriage allowance.
  • Higher rate relief for personal pension contributions and gift aid.

Arranging to bank a payable order (cheque) from HMRC may be difficult during the pandemic. The Tax Faculty advises that, where possible, individuals who have overpaid tax should apply for electronic payment of the refund directly to their bank account. This can be done through the personal tax account, or by using HMRC’s app. Applying for electronic payment also avoids a delay of up to two months for HMRC to send the payable order.

Individuals who have underpaid tax may receive a P800 tax calculation indicating that HMRC will collect the underpayment by adjusting their tax codes for 2020/21 or a subsequent year. If HMRC is unable to collect the underpayment by adjusting tax codes it will instead issue a PA302 simple assessment which will need to be paid (usually by 31 January 2021). The Tax Faculty has published a detailed guide to simple assessment. 

Individuals who are registered for self assessment and who submit a tax return should not receive a PAYE tax calculation, but this occasionally goes wrong and the individual or their agent will need to contact HMRC to get the record corrected.