If you are taxed under PAYE and have not completed an annual tax return, you may receive a tax calculation (on form P800) from HMRC, which covers the previous tax year. You must check this carefully and send a copy to our team to assess as HMRC can make mistakes, and this computer-generated calculation may contain structural errors.

Why Should You Get Your Tax Calculation Checked?

The most common error occurs when a taxpayer has significant savings or dividend income, as well as their salary or pension income. In this instance, the savings rate band (this is 0% tax on up to £5,000 of savings) and the savings allowance (this is 0% tax on up to £1,000) may come into play.

Due to the laws in place, taxpayers are allowed to set themselves a personal allowance against their income. This can be in any order and based on their preferences, taking advantage of these two savings reliefs.

However, the PAYE computer has been programmed to allocate the personal allowance in a particular order, which is why errors occur. This order is:

  • Non-savings income (employment, profits and pensions)
  • Savings income
  • Dividends

To prevent any problems, it may be better for taxpayers to set their personal allowance first against non-savings income, then dividends and then savings income. This will leave the maximum amount of savings to be covered by the savings allowance.

At Digital Tax Matters, we are able to check whether the HMRC calculations work in your favour. As this error has been causing issues for a number of years, we will be able to review your tax dating back as far as 2015-16. Feel free to contact us if you are worried you may have errors in your tax calculations.