When your employment income increases you tax code should be updated by HMRC sending your employer a P6 form, either online (through PAYE Online) or by post. However, if this code is not timely adjusted you might be underpaying your income tax and should be able to pay back the 'underpayment' for the current or earlier tax years.
According to HMRC you might have underpaid tax if:
you started getting company benefits - like a company car or medical insurance and HMRC didn't know about it right away
other income you have - like investment or rental income - has increased since you last told HMRC about it
you started getting the State Pension and HMRC didn't know right away
your employer or pension provider used the wrong tax code
It's very important that you tell HMRC about changes to your income or company benefits as soon as possible so that you don't end up with a large tax bill at the end of the tax year.
If you owe less than £3,000 you will usually be able to pay back the amount through your tax code. If you owe £3,000 or more different arrangements apply:
Making a voluntary direct payment
Paying through your tax code:
using PAYE without filing a Self-Assessment:your employer or pension provider deducts tax from your salary or pension before you receive it.
using PAYE and completing a Self-Assessment if you have other income such as income from rents, freelancing or investments.
SimpleTax makes it easy for you to declare your underpaid tax. By selecting "Yes" on the "Do you have underpaid tax or outstanding debt in your PAYE Coding Notice?" parameter of the final submission page you will be able to enter the following values:
Underpaid tax for earlier years included in your tax code for this year
Underpaid tax for this year included in your tax code for next year's.
Outstanding debt included in your tax code for this year.
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