Home > Tax Tips > Top 5 Problems With PAYE Income Tax

Top 5 Problems With PAYE Income Tax

By: J.A.J Aaronson - Updated: 3 Sep 2012 | comments*Discuss
Paye Problems Tax Problems Income Tax

The majority of taxpayers in this country pay their tax via the Pay As You Earn, or PAYE system. This is a simple means by which payments can be made to HM Revenue & Customs (HMRC), with little or no action on the part of the individual. Bearing in mind the number of people whose tax affairs fall under the auspices of the PAYE scheme, and the number of years for which it has been operating, one could be forgiven for expecting it to go smoothly almost all of the time. The reality, however, is that the system is riven by problems – a fact to which many taxpayers can testify.

Here are the most serious and frequently cited problems with the PAYE tax system.

1. Incorrect Tax Codes

The correct operation of the PAYE system relies in great part on the tax codes allocated to every relevant taxpayer. Your Tax Code ultimately determines how much tax you will pay. The accuracy of your tax code depends on your tax office being supplied with accurate information. It also depends, of course, on the competence of your tax office.

If you have a significant change of circumstances – for example, if you turn 65 and therefore qualify for age-related relief – then your tax code will need to be changed. The tax office may or may not do so automatically.

2. No P45

When you leave a job your employer should give you a P45, which you will need to pass on to your next employer. If you do not have a copy of this form, all your details will need to be resubmitted to the tax office. You and your employer will need to complete a form P46 which your employer should submit to their tax office on your first pay day. The P46 is the form to tell the tax office about employees who do not have a P45 and can be submitted online. You must complete the form before your first payday or you will be taxed on an 'emergency tax code'.

3. Emergency Tax

When you start a new job, particularly if it is your first, you are likely to be placed on an ‘emergency tax code’. This is used by HMRC until they have enough information to determine what your tax code should actually be.

4. Benefits in Kind

Many employees receive some Benefits In Kind from their employer. Amongst the most common such benefits are Company Cars. These will not be included on your pay slip, and will therefore not be taxed through the PAYE system. However, many benefits in kind are still taxable. You must therefore list any such benefits on an annual Self Assessment Form.

5. HMRC Mistakes

Sadly, HMRC make mistakes, with many tax offices chronically understaffed. A significant number of PAYE errors are simple mistakes on the part of HMRC. In these cases, you should make a complaint to your local tax office, first by telephone and then in writing. They will generally rectify problems quickly, but you may find that you wait some months – particularly if you are owed a rebate.

PAYE is an important part of many Britons’ day-to-day lives. You should always ensure that you fully understand your tax affairs, and that you could spot a mistake or problem as soon as one arises.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
Why not be the first to leave a comment for discussion, ask for advice or share your story...

If you'd like to ask a question one of our experts (workload permitting) or a helpful reader hopefully can help you... We also love comments and interesting stories

(never shown)
(never shown)
(never shown)
(never shown)
Enter word:
Latest Comments
  • Kenthen
    Re: What Does Road Tax Pay For?
    I often wondered if it's legal for the council to close public roads for pedestrian usage unless it's for repair or some other road…
    11 August 2019
  • Oky
    Re: How Will My Second Job Be Taxed?
    Hi if I work for 2 agency. One job is 40 hour per week and other is 12 or 20 hours per week, only for one week it will be.…
    7 August 2019
  • Jo-jo
    Re: How Will My Second Job Be Taxed?
    I have main job at 24 hours a week and earn £198 a week if I take on a 2nd job at 10 hours a week at £9.04 an hour how much…
    3 August 2019
  • Jules
    Re: Should I be Paid Mileage Allowance?
    Im a carework i dont get paid any mileage i only get 25p per visit but my calls are 5 & 6 miles apart how do i claim some…
    24 July 2019
  • San
    Re: What is My Tax Code?
    Hello I have a first job and I am earning 290 a week and have been charged 60 for that first wage and I have started a second job for weekend…
    18 July 2019
  • MH829567
    Re: What Does Road Tax Pay For?
    Road Tax doesn't pay for anything cos it don't exist. Vehicle Excise Duty or CAR tax pays for the environmental effects of the…
    9 July 2019
  • Sandra
    Re: Payment of Pensions
    I want my pension to be paid weekly not monthly can this be changed ?
    5 July 2019
  • Sandra
    Re: Payment of Pensions
    I want my pension to change from monthly to weekly can thus happen?
    5 July 2019
  • vic
    Re: How Will My Second Job Be Taxed?
    my son is at uni and works on a sat for 8 hrs, he has just started a full time summer job until uni goes back and has been…
    4 July 2019
  • Jane
    Re: How Will My Second Job Be Taxed?
    Hi, I've recently been offered 2 part time positions (very similar roles) and am wondering if I could accept both offers? In…
    4 July 2019