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HMRC ‘Issue Briefing’: PAYE underpayments

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HMRC has published an ‘Issue Briefing’ to help taxpayers understand ‘how PAYE underpayments happen’. The department is sending more than a million letters to taxpayers who did not pay enough tax under PAYE in 2010/11. 

The underpayment will be ‘coded out’ in the vast majority of cases, HMRC said. ‘For those owing amounts up to £3,000, we can usually code out any underpayment. For those owing £3,000 and over, we will ask for direct payment. If the underpayment is less than £50, we will not collect it.’

Where the underpayment arose because the taxpayer received a state pension which HMRC was ‘unable to match to their tax record’, HMRC will ‘automatically’ spread collection by coding it out over the next three years.