P800 Tax Calculation letter from HMRC

If any of your employees receives one of these forms, then one of the following will happen:

• If they have underpaid by an amount of less than £2000, they will be given a new tax code for the start of the next tax year. This means that the repayment of the tax owed will be spread over the tax year.
  
  Tip: You don’t need to do anything in your payroll software until you receive this notification, which is usually issued in January or February. When you receive it, either through the post or via the IR Secure Mailbox feature in your payroll software, simply change the tax code as normal when advised to do so by HMRC.
• If they have underpaid by an amount of £2000 or more, HMRC will contact your employee directly to advise how it can be paid back.
• If they have overpaid, HMRC will contact your employee.

If the employee doesn't receive a form P800 Tax Calculation, then you don’t need to do anything. Most people have paid the correct amount of tax and won't receive a letter and P800 Tax Calculation from HMRC.

Note: You must not change your employee’s tax code unless you are told to do so by HMRC.

For more information and help the employee should read the notes provided with the letter, you can find copies here:

• P800 notes
• P800 additional notes

You can also find out lots more information about P800 Tax Calculations at www.hmrc.gov.uk/incometax/p800.htm

It's normal for employees paid in week 53 in the previous tax year to have underpaid tax. This is because for each tax code there is a set amount of free pay per year. For weekly paid employees, a weekly free pay allowance is calculated by dividing their yearly free pay allowance by amount by 52. They then receive this amount of tax free pay every week. However, if an employee is paid 53 times in a tax year, week 53 is calculated using an additional weekly free pay allowance, and therefore receive too much free pay.

For example, a weekly paid employee earned £20,000 in the 2016/2017 tax year on tax code 1100L and was paid in week 53.

Note: Calculating tax in week 53 using a week 1 free pay allowance is the correct method required by HMRC. All week 53 tax calculations are carried out like this, regardless of whether you process tax using software such as Sage, manual calculations or using HMRC calculators. For more information, see page 11 of HMRC CWG2 - Employer Further Guide to PAYE and NICs .