If you’re working in the UK and paying taxes, you might be awaiting some news.
HMRC is about to send out letters informing people of the calculation for the previous tax year.
Some individuals will receive a tax refund from HMRC, while others may owe additional tax for the previous year.
At the end of the tax year, HMRC calculates whether taxpayers have paid the correct amount of tax.
Once you are employed by a company or receiving a pension, you will receive this letter.
This means employed taxpayers will receive a P800 (tax calculation letter) along with a concise assessment letter.
The letter will explain your tax situation for the previous year and the balance HMRC owes you or you owe HMRC.
If you’re registered for self-assessment, your bill will be adjusted automatically, and you won’t receive this letter.
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How to Get a Tax Refund
In a tax year, changes can result in overpayment of tax.
Once HMRC confirms an overpayment, they will refund the excess to the taxpayer.
In one study, a third of taxpayers paid incorrect tax, overpaying an average of nearly £700.
When you receive the letter, HMRC will guide you to apply for a refund online via GOV.UK.
If there’s no action after 21 days, a refund cheque will be sent directly to the taxpayer.
How to Pay Underpaid Tax
Firstly, underpaying tax doesn’t mean you’re evading tax responsibilities and won’t face penalties; you needn’t feel any psychological pressure.
There are many reasons for underpaying tax, such as your employer assigning the wrong tax code or complexities in your income composition.
Once you receive a letter from HMRC, simply pay the underpaid tax on time if there are no disputes.
If you have any doubts about HMRC’s calculations, it’s essential to contact the tax office promptly to avoid future complications.
What Self-Employed Individuals Need to Note
If you’re self-employed, we recommend registering for self-assessment promptly and filing tax returns and payments on time.
Especially note the updated tax regulations this year, as some easily overlooked details could prompt an audit by the tax authorities.
You can open a separate business account to keep finances separate from personal expenses, making it easier to manage financial data.
In addition, it’s crucial to retain financial records, sales records, etc., for over six years to avoid unnecessary trouble.
