Getting a letter from HMRC saying you owe money is alarming, especially when you thought your tax was handled through your wages. Here’s why it happens and what you can do about it.
What is a P800?
A P800 is HMRC’s calculation showing whether you’ve paid the right amount of tax during a tax year. HMRC sends these between June and October after each tax year ends (5 April).
Two possible outcomes:
- You overpaid tax: You’ll receive a refund
- You underpaid tax: You owe HMRC the difference
The P800 shows:
- Your taxable income sources
- Tax deducted by employers/pension providers
- Tax HMRC says you should have paid
- The difference
15 Common Reasons You Might Owe Tax
1. Wrong Tax Code
If your tax code was incorrect, your employer would have deducted the wrong amount of tax throughout the year.
Common causes:
- HMRC had outdated information
- Your circumstances changed mid-year
- Emergency tax code applied
- Benefits in kind not properly reflected
👉 Why has my tax code changed?
2. Multiple Jobs or Income Sources
If you have two jobs, your Personal Allowance should go to one employer only. If both applied it, you didn’t pay enough tax on the second job.
How it works:
- Job 1 uses code 1257L (£12,570 allowance)
- Job 2 should use BR (20% on all earnings, no allowance)
- If Job 2 also used 1257L, tax was under-deducted
3. Started a New Job Mid-Year
When you start a new job without a P45 from your previous employer, your new employer might:
- Apply an incorrect tax code
- Use emergency tax (which may under- or over-deduct)
- Give you a second Personal Allowance incorrectly
4. State Pension Plus Employment
The State Pension is taxable, but it’s paid without tax deducted at source. If you receive State Pension plus employment income:
Example:
- State Pension: £11,500/year
- Employment: £15,000/year
- Total: £26,500
- Personal Allowance: £12,570
- Taxable: £13,930
- Tax due: £2,786
If your employer only taxed the £15,000 (giving you full Personal Allowance on that), they deducted tax on just £2,430 (£15,000 - £12,570). The rest is collected via P800 or adjusted tax code.
5. Employment Benefits in Kind
Company cars, private medical insurance, and other benefits are taxable. If HMRC’s estimate of your benefit value was lower than actual, you’ll owe the difference.
Common benefits that cause underpayment:
- Company car (P11D value higher than expected)
- Private medical insurance
- Interest-free loans
- Living accommodation
6. Savings Interest Above Your Allowance
Your Personal Savings Allowance lets you earn £1,000 (basic rate) or £500 (higher rate) interest tax-free. Above this, tax is owed.
If your bank/building society didn’t deduct tax (most don’t since 2016), and your interest exceeded the allowance, you’ll owe tax via P800 or Self Assessment.
7. Dividend Income
The £500 Dividend Allowance lets you receive dividends tax-free. Above this:
- Basic rate: 8.75% tax
- Higher rate: 33.75% tax
- Additional rate: 39.35% tax
If dividends exceeded £10,000, you should have filed Self Assessment. Below £10,000, HMRC may collect via code adjustment — but if not caught in time, a P800 bill results.
8. Rental Income
Rental income is taxable, but no tax is deducted at source. If you didn’t report it via Self Assessment, HMRC may calculate you owe tax once they become aware.
9. Untaxed State Benefits
Some state benefits are taxable:
- Taxable: State Pension, Bereavement Allowance, Widowed Parent’s Allowance, Incapacity Benefit (in some cases), Employment and Support Allowance (contributory)
- Not taxable: Universal Credit, Child Benefit, PIP, DLA, Housing Benefit
If you received taxable benefits without tax deducted, you may owe via P800.
10. Pension Withdrawals
Private pension withdrawals above your Personal Allowance are taxable. Emergency tax rates may apply to first withdrawals, leading to:
- Overpayment (you paid too much emergency tax — refund due)
- Underpayment (emergency tax was less than correct rate)
11. High Income Child Benefit Charge
If you or your partner earn over £60,000 and claim Child Benefit, you must repay some or all through the High Income Child Benefit Charge.
| Income | Charge |
|---|---|
| £60,000 | 0% |
| £65,000 | 25% of Child Benefit |
| £70,000 | 50% of Child Benefit |
| £80,000+ | 100% (full repayment) |
If you didn’t report this via Self Assessment, HMRC will calculate the amount owed.
12. Tax Hasn’t Caught Up With Pay Rise
If you received a pay rise mid-year, your cumulative tax code catches up over time. But significant rises late in the tax year may not fully adjust before April, leading to underpayment.
13. Emergency Tax Applied Too Long
Emergency tax codes (W1 or M1) calculate tax on each pay period in isolation, ignoring cumulative allowances. If this continued for months, your year-end position might show underpayment.
14. Self-Employment Income Not Reported
If you had side income or freelance work and didn’t declare it, HMRC may discover it through:
- Platform reporting (eBay, Etsy, Uber)
- Bank account data matching
- Third-party information
15. HMRC Error
Sometimes HMRC simply makes mistakes — wrong data, processing errors, or miscommunication with employers. If something looks wrong, investigate before assuming the bill is correct.
How to Check If Your P800 is Correct
Step 1: Sign Into Your Personal Tax Account
Go to gov.uk/personal-tax-account and view:
- Your employment income (from employer records)
- Benefits and deductions HMRC applied
- Tax codes used
- The calculation breakdown
Step 2: Compare to Your Records
Check HMRC’s figures against:
- Your P60 (end of year employment statement)
- Payslips throughout the year
- Bank statements showing interest received
- Dividend certificates
- Pension statements
Step 3: Identify Discrepancies
Look for:
- Wrong income amounts
- Missing allowances you should have received
- Incorrect benefit values
- Tax codes that don’t match your circumstances
Step 4: Calculate Yourself
Use HMRC’s basic calculation:
- Add up all taxable income
- Subtract Personal Allowance (£12,570)
- Apply 20%/40%/45% rates to remaining income
- Compare to tax actually paid
If your calculation differs significantly from HMRC’s, something is wrong.
What to Do If You Disagree
Contact HMRC
If the figures look wrong:
- Online: Through your Personal Tax Account
- Phone: 0300 200 3300 (Income Tax helpline)
- Post: PAYE and Self Assessment, HM Revenue and Customs, BX9 1AS
Have ready:
- Your P800 reference
- Your National Insurance number
- Evidence showing correct figures (P60, payslips, bank statements)
Request a Formal Review
If HMRC maintains the bill is correct and you disagree:
- Request an independent review in writing
- HMRC will reconsider with a different officer
- If still unsuccessful, you can appeal to the Tax Tribunal
Don’t Ignore It
Even if disputing, engage with HMRC. Ignoring letters leads to:
- Interest accumulating
- Debt collection action
- Enforcement without your input
What to Do If You Can’t Afford to Pay
Don’t Panic
Unexpected tax bills are stressful, but options exist.
Time to Pay Arrangement
Contact HMRC’s Payment Support Service to spread the bill:
Phone: 0300 200 3835
Hours: Monday-Friday 8am-8pm, Saturday 8am-4pm
You can arrange:
- Monthly instalments
- Typically up to 12 months
- Interest applies at ~7.5% annually
- Stops enforcement action
For Self Assessment Debts Under £30,000
Set up Time to Pay online via your Personal Tax Account — no phone call needed if you meet the criteria.
Hardship Relief
In extreme financial difficulty, HMRC may:
- Reduce penalty amounts
- Agree to longer payment terms
- Consider writing off debt (rare, for genuine hardship)
How to Prevent Future Underpayments
Check Your Tax Code Annually
Each April, verify your tax code is correct. The standard code for one job with no adjustments is 1257L.
Update HMRC About Changes
Tell HMRC when:
- You start receiving State Pension
- You change jobs
- Your benefits in kind change
- You have additional income sources
- Your circumstances change
Review Your P60
When you receive your P60 each May, check the income and tax figures match your expectations. Catching errors early prevents surprise P800s.
Report Untaxed Income Properly
If you have savings interest over your allowance, dividend income, or rental property, ensure you either:
- Have HMRC adjust your tax code to collect throughout the year, or
- File Self Assessment and pay when due
Use the HMRC App
The free HMRC app shows your current tax position, making it easier to spot problems before year-end.
Key Takeaways
- A P800 calculates whether you paid the right tax — you may owe or be refunded
- Common causes of owing: wrong tax code, multiple jobs, State Pension, untaxed benefits/interest
- Check the figures before paying — HMRC makes errors
- If you can’t afford to pay, arrange Time to Pay by calling 0300 200 3835
- Don’t ignore HMRC letters — engage and dispute if wrong, pay if correct
- Prevent future bills by checking your tax code and reporting changes promptly
This guide covers general reasons for HMRC underpayments. If you face significant bills or don’t understand your calculation, seek advice from an accountant or tax professional. This is not tax advice.