Underpaid Tax: How to Check, Pay and Challenge

What happens if you’ve underpaid tax?

Underpaid tax means HMRC collected less income tax than you owed during a tax year. HMRC sends a P800 tax calculation or simple assessment HMRC letter explaining the shortfall.

Most PAYE underpayments are collected by adjusting your tax code the following year. Larger amounts — or cases where the error isn’t yours — are handled differently.

Underpaid tax happens when the information HMRC holds during the year doesn’t match your actual income. A wrong tax code, a second job, or untaxed benefits can all trigger it.

The shortfall can be a significant sum to find unexpectedly. It typically builds up over months and only surfaces when HMRC runs its end-of-year reconciliation and sends a P800 or simple assessment.

The good news? Most underpaid tax situations are straightforward to sort out. The process for checking or challenging an HMRC underpayment letter follows a clear path.

This guide covers why a PAYE underpayment happens and how to check underpaid tax on your P800. It explains your payment options and what to do if the underpaid tax isn’t your fault.

Scam letters disguised as genuine HMRC notices are also covered — which, frankly, catches a lot of people out. If you’re on self assessment, underpaid tax self assessment rules differ slightly.

Why You’ve Underpaid Tax Through PAYE

Underpaid tax through PAYE doesn’t mean you’ve done anything wrong. It typically means HMRC’s records didn’t match your actual income during the tax year.

The most common trigger is a wrong tax code.

Your code tells your employer how much tax-free income to allow before deducting tax.

If that code is based on outdated information, the sums don’t add up by April.

Specific situations that cause a PAYE underpayment include:

• Starting a second job where both employers apply the full 1257L code, doubling your tax-free allowance.
• Receiving a company benefit — a company car or private medical insurance — without a matching tax code update.
• Changing jobs mid-year without your P45 being processed, so prior earnings aren’t factored into deductions.
• Week 53 payroll — years with an extra weekly pay period cause payroll software to allocate excess tax-free allowance.
• Savings income exceeding the savings starter rate, starting rate for savings allowance, or 0% savings rate threshold.

It’s your responsibility to check your tax code and flag concerns to HMRC. The starter rate savings allowance is one area that trips up retirees and low earners in particular.

How to Check Underpaid Tax on a P800

HMRC sends P800 tax calculations between June and November each year. Each P800 covers the tax year that ended the previous April.

A P800 underpayment shows your total income, the tax collected, and the shortfall.

Don’t panic if the numbers look unfamiliar at first. The P800 pulls data from every source HMRC holds — employer submissions, pension providers, the DWP, and P11D benefit reports.

Cross-check the figures against your own records. Your P60 shows total pay and tax for each job, and your P45 covers roles you left during the year.

These documents are accessible through your personal tax account on GOV.UK. The form itself is straightforward enough — but query any figure that looks wrong before paying.

One thing trips people up here. HMRC’s records sometimes lag behind reality — a mid-year pay rise or new benefit can take months to filter through. That delay often causes the underpaid income tax.

How HMRC Collects the Difference

The route HMRC takes depends on how much you owe. HMRC guidance sets out three thresholds.

Under £50

Small underpayments below £50 are typically written off. If you receive a letter demanding this amount, contact HMRC on 0300 200 3300 and request cancellation.

Don’t assume every small amount disappears, though. HMRC can still pursue it.

Between £50 and £2,999.99

For amounts in this range, HMRC normally uses a tax code adjustment underpayment. Your PAYE tax code changes so slightly more tax comes from each pay packet.

A coding notice arrives to confirm the change. This spreads repayment across 12 months, which most people find manageable.

£3,000 or More

Larger underpayments aren’t collected through your tax code. If you’re wondering how to pay underpaid tax at this level, HMRC requires a direct bank transfer or cheque.

You’ll need a 17-character payment reference combining your National Insurance number, P800, and the tax year. GOV.UK confirms the bank details.

A Worked Example With Real Numbers

Numbers make this clearer. Take someone earning £28,000 at their main job and £7,000 from a weekend role.

Both employers apply the 1257L code. That gives a personal tax free allowance of £12,570 at each job — £25,140 of tax-free income in total.

The actual entitlement is £12,570 — so £12,570 of income escapes tax when it shouldn’t.

At the basic rate of 20%, that’s £2,514 of underpaid tax. HMRC picks this up during reconciliation and sends a P800 showing the shortfall.

Because the amount falls below £3,000, HMRC adjusts the following year’s code, meaning roughly £210 less take-home pay each month — noticeable, but predictable.

The fix is straightforward: the second job should use a BR code, which applies 20% tax to every pound earned there.

When You Can’t Afford the Tax Bill

An unexpected HMRC tax bill can cause real financial stress. Options exist if you can’t afford underpaid tax in one hit.

The first step is to phone HMRC on 0300 200 3300 and ask about a time to pay HMRC arrangement.

This is a formal agreement to spread the debt over a longer period. HMRC typically allows up to 12 months, though longer arrangements have been agreed in genuine hardship cases.

Tax code adjustments are interest-free. Direct payments, however, now attract interest at the Bank of England base rate plus 4% — that stood at 7.75% in early 2026.

Don’t wait for HMRC to chase you. Calling promptly shows good faith and makes an agreement far more likely.

Ignoring the letter doesn’t make the debt go away. HMRC can pursue underpaid income tax for up to four years for genuine mistakes — and longer for deliberate errors.

For amounts between £50 and £2,999.99, you can request that the tax code adjustment underpayment is spread across two years rather than one.

ESC A19: Challenging an Underpayment

What if the underpaid tax is not your fault? Many people search for underpaid tax not my fault — and for good reason.

If HMRC had the information it needed and failed to act in time, you may not have to pay. The mechanism is called ESC A19 — Extra Statutory Concession A19.

It lets HMRC write off the debt entirely where the error was theirs.

The key test is timing. HMRC’s deadline is 12 months from the end of the tax year — if they notify you after that window, ESC A19 may apply.

To claim, write to the address on your P800 or simple assessment. State you’re applying under ESC A19 and include four things:

• The tax year the underpayment relates to.
• What information HMRC failed to use.
• When that information was provided.
• Why you believed your tax affairs were in order.

There’s no legal right to appeal underpayment of tax under this concession. But you can request a review by a different officer.

Employer errors are separate. If your employer knew deductions were wrong and didn’t correct them, HMRC may hold the employer liable.

How to Spot a Scam Underpayment Letter

Scam letters pretending to be from HMRC are increasingly common. According to GOV.UK guidance on tax scams, HMRC received over 130,000 scam reports in a single year.

An underpayment notice is exactly the kind of letter fraudsters exploit.

A genuine P800 or simple assessment arrives by post — not by email, text, or WhatsApp. That’s the first check.

Other red flags to watch for:

• The letter asks you to reply by email or click a link — HMRC doesn’t do this for tax calculations.
• Any reply address that doesn’t end in hmrc.gov.uk, or uses a domain like hmrc-review.com.
• Threats of immediate legal action or arrest in a first communication.
• You’re asked to pay using gift cards, vouchers, or cryptocurrency.

If anything looks suspicious, don’t respond to the letter. Log into your personal tax account on GOV.UK to check for a genuine underpayment instead.

You can also call HMRC on 0300 200 3300 — use the number from GOV.UK, not the one on the suspect letter.

Your Next Step on Underpaid Tax

Underpaid tax is common, manageable, and — in most cases — collected gradually through your tax code.

Start by checking the figures on your P800 against your own records. No action is needed for code adjustments below £3,000.

For larger amounts, contact HMRC about a time to pay arrangement before the deadline passes.

Where the error sits with HMRC, an ESC A19 claim can result in the debt being written off. The P800 guide explains how to read your calculation in detail.

Check your personal tax account on GOV.UK to see your current position and any outstanding amounts.

Key Takeaways

The essentials on underpaid tax:

• HMRC identifies underpaid tax during its end-of-year reconciliation, notifying you by P800 or simple assessment between June and November.
• Underpayments below £3,000 are normally collected through a tax code adjustment, spread across 12 monthly pay packets.
• If you can’t afford the repayment, phone HMRC to arrange a time to pay plan — longer periods are possible in hardship cases.
• Where HMRC caused the error, you can apply under ESC A19 to have the underpaid tax written off entirely.
• Scam underpayment letters are common — verify any notice through your GOV.UK personal tax account before responding.

Keep your tax code under review after changing jobs, starting a second role, or receiving a new company benefit.

Frequently Asked Underpaid Tax Questions

Got a P800 and still not sure where you stand? These cover the questions that come up most.

Does underpaid tax affect my credit score?

An underpaid tax notice doesn’t appear on your credit file. HMRC only reports debts to credit agencies at enforcement stage — county court judgments or bankruptcy.

That said, a tax code adjustment reducing your take-home pay could affect other financial commitments. A manageable repayment plan avoids that pressure.

Can HMRC chase underpaid tax from years ago?

HMRC can go back four years for genuine mistakes and six years for careless errors. Deliberate tax evasion allows a 20-year lookback.

For standard PAYE coding errors, the four-year window applies. Check whether ESC A19 covers the situation before paying.

What happens if I ignore an underpaid tax letter?

HMRC doesn’t forget. If you ignore a P800 or simple assessment, HMRC can adjust your tax code without your agreement or pass the debt to a collection agency.

Responding promptly — even just to query the figures — is far better than silence. Unanswered debts can also escalate to county court proceedings.

What’s the difference between a P800 and a simple assessment?

A P800 is an automated calculation sent after HMRC’s end-of-year reconciliation. A simple assessment is a formal tax bill for cases where a code adjustment isn’t possible.

Both show income, tax paid, and the shortfall. The difference is the collection method — code change versus direct payment.

Can I owe underpaid tax for more than one year at once?

Yes — HMRC can issue separate P800s for multiple tax years. Each year is calculated independently, so you could receive several letters at once after a prolonged coding error.

If that happens, each underpayment follows the same rules on thresholds and collection. You can request a time to pay arrangement that covers the combined total.

For further details, check the relevant GOV.UK guidance or contact HMRC on 0300 200 3300.