Can I pay my underpaid income tax through my PAYE code?

When it comes to paying your income tax, if you're not able to pay by 31st January you need to take action sooner rather than later. Late payments will result in fine being issues by HM Revenue & Customs (HMRC).

If you speak to HMRC, you may be able to set up a payment plan to pay your tax over a number of payments.

Another option, if you submit your self-assessment tax return by 30th December, is for the tax to be collected through your tax code.

Paying your tax through your tax code

Where tax is collected through your PAYE code, the tax you owe will be taken from your salary or pension in equal instalments over 12 months, along with your usual tax deductions. The adjustment is made by adjusting the tax code applied to your income, which will reduce your take home pay. 

Do remember that if you wish to pay your tax through your tax code, the deadline for submitting your self-assessment tax return online is 30th December. 

You can pay income tax through your tax code if you: 

• owe less than £3,000 
• already pay tax through PAYE 
• submit a paper tax return by 31st October or an online tax return by 30th December 

You must also have sufficient PAYE income to pay the tax. HMRC will not adjust your tax code if: 

• you don’t have enough PAYE income for HMRC to collect it 
• you’d pay more than 50% of your PAYE income in tax 
• you’d end up paying more than twice as much tax as you normally do 

You will automatically pay underpaid tax through your PAYE code, unless you specifically ask HMRC not to. This can be by ticking a box on your self-assessment tax return, or asking your accountant to do so. Your accountant may do this automatically and advise you of this, you can then decide how to you’d like to pay your tax. 

How Luton North West we help?

At TaxAssist Accountants Luton North West we are experts in self-assesment tax and are ready to help you. If you’d like our help submitting your tax return, contact us today on ::telelphone:: or use our online contact form. 

Last updated 9 Nov 2023 | First published 9 Nov 2023

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This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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