HMRC’s New Approach to Tax Underpayments

From the 2017/18 tax year, HMRC plans to collect potential underpayments within the tax year they arise, rather than the following year as previously practiced. This means that if an underpayment is identified during the 2017/18 tax year, HMRC will aim to adjust the tax code within the same year to collect the owed amount promptly.

Actual tax underpayments identified through P800 calculations for 2016/17 will also be collected in 2017/18. This shift advances the payment of tax, ensuring that liabilities are settled more promptly.

Safeguards to Protect Taxpayers

To prevent hardship, HMRC has implemented safeguards to restrict the amount of tax that can be collected through this method. One such safeguard is the ‘50% regulatory limit.’ This ensures that no more than 50% of an individual’s pay is deducted through PAYE adjustments. This limit is designed to prevent excessive deductions that could significantly impact an individual’s take-home pay.

Implications for Taxpayers

This proactive approach by HMRC means that taxpayers need to be more vigilant about their tax affairs. And that’s particularly within the current tax year. It’s essential to keep personal information up-to-date with HMRC to ensure accurate tax code adjustments. Regularly reviewing your tax code and understanding any changes can help prevent unexpected deductions.

How We Can Help

Navigating these changes can be complex. At Lewis Brownlee, we offer expert advice to help you understand HMRC’s tax underpayment collection methods and how they may affect you. For personalised assistance, contact us today. As leaders in the field of tax, we are always happy to see how we can help. Plus, we also offer a free introductory meeting. That way, you can find out what we do and how we do it before you commit. So, you have nothing to lose and potentially everything to gain. 

By staying informed and proactive, taxpayers can better manage their tax obligations under HMRC’s updated collection approach.