How do you get HMRC to correct a tax code error?

Heather Rogers is the founder and owner of Aston Accountancy.

Your tax code is very important so it is crucial to find out if it is correct and get the taxman to put a mistake right as soon as possible.

Where to find your tax code, what it means and how to check it is explained here. 

This time, let us look at what happens if HMRC makes a mistake on your code and what steps to take to sort it out.

Receiving your new tax code

In the last few weeks, HMRC has been sending out tax coding notices for 2022/23 which apply from 6 April 2022.

If you haven’t received one yet and have a self-assessment account then check online, or if you use an accountant ask them to check for you.

If necessary, you can call HMRC on 0300 200 3300. Have your National Insurance number to hand. 

What if you believe your code is incorrect

You’ve received your code, you have checked it and there is an adjustment either being added to or subtracted from your code which you don’t recognise or believe is incorrect. What next?

Work out why your code might be incorrect if possible. Here are some common reasons for errors in your tax code.

– HMRC has carried forward the same adjustments on your tax code from the previous year. For example, a benefit in kind which would show as a deduction from your code, or a job expense which would show as an addition, which no longer applies to your circumstances. This can be because you have changed your job or remuneration package but HMRC has not updated your information, or the change is too recent for it to know about.

– Your employer has not yet submitted your P11D (return of benefits and expenses) for the tax year where changes to your circumstances took place.

– HMRC has not processed the P11D correctly. This is a very common problem sadly.

– It has not responded to information in its possession, such as details contained in your self-assessment tax return. This might advise a new income source, for example.

– HMRC is collecting estimated underpaid tax based on a calculation from an earlier year which is not relevant to your circumstances now as your circumstances have changed.

– You are a higher rate taxpayer and have either started to receive child benefit or have stopped and HMRC has not included the appropriate adjustment in your code.

– HMRC is collecting an amount through your code for unpaid tax for an earlier year but you filed a self-assessment return for the year in question and you have paid the shortfall.

– Your marriage allowance is missing or a transfer of your partner’s permissible allowance has not occurred.

It is up to you to check the code carefully, tell HMRC of any errors and advise of any changes in your personal circumstances.

Remember your employer is duty bound to use the code supplied by HMRC to deduct tax. Therefore any errors should be advised to HMRC as soon as possible to avoid the wrong amount of tax being deducted.

Your employer only receives your code. It does not receive a breakdown of how the code has been calculated. 

Ways to contact HMRC if you think your code is wrong

There are unfortunately a lot of steps to follow if you don’t manage to resolve this with HMRC.

You can call, go online or write to HMRC.

– Call HMRC on 0300 200 3300. Have your national insurance number to hand. Bear in mind when calling to avoid busy times, as it can take a while to get through to a person.

– Use the website https://www.gov.uk/check-income-tax-current-year if you are not on self-assessment. This will help you check your tax position.

– Write to the following address.

Pay As You Earn and Self Assessment, HM Revenue and Customs, BX9 1AS, United Kingdom.

If you use the postal service, you can use HMRC’s ‘Where’s my Reply?’ tool here.  

What happens if HMRC disagrees and says your code is right?

At this point, it is best to write to HMRC at the address given above.

Quote your National Insurance number, and your Unique Tax Reference (UTR) if you are on self-assessment. Explain why you think your code is incorrect and enclose supporting documentation if you have any.

You can check HMRC’s expected response time by using the ‘Where’s my Reply?’ link above. 

Moving on to making a formal complaint

If you do not receive a response, or you are unhappy with the response you do receive, or there are unacceptable delays, you can complain.

Again, you can call, go online or write to HMRC.

– Call HMRC on 0300 200 3300, with your National Insurance number to hand.

– To complain online, you will need a Government Gateway user ID and password. If you do not have a user ID, you can create one when you complain.

– Write to HMRC at the address given above.

Again, quote your National Insurance number, and your Unique Tax Reference (UTR) if you are on self-assessment.

Explain what has happened and why you are unhappy.

Enclose any supporting documentation.

Say how you would like your complaint resolved. 

What if you are still not happy with HMRC’s response?

If you remain convinced that your tax code is incorrect, you can request a second review by another officer at HMRC. Follow the procedure above again.

If that does not work, you can ask the Adjudicator’s Office to review your complaint. The details are here. 

If you disagree with the Adjudicator’s Office, you can ask your MP to refer your complaint to the Parliamentary and Health Service Ombudsman. 

Find your MP and how to contact them here. They might forward your complaint direct to the Ombudsman themselves, but check if they have done so. 

A note of caution: Getting your complaint dealt with

It is worth marking your envelope ‘formal complaint’ as a lot of post is not being responded to by HMRC at the moment.

This lack of response to written communications has been happening for some time, including on some tax code enquiries.

This is a matter that requires addressing with some urgency by HMRC as in many cases it is causing much distress amongst taxpayers.

In normal circumstances, I would recommend sticking to HMRC’s rules regarding complaining and follow the exact procedure I have laid out here.

However, circumstances are not normal and HMRC is not always replying.

If this happens to you, and you write a complaint and do not receive a reply within a reasonable time, 28 days for example, I suggest you write again and mark the letter and your envelope ‘second complaint’.

If you do not hear back after another 28 days after writing a second time, I suggest contacting the Adjudicator’s Office directly.

When this office receives your letter it will write back to you, enclosing an authority form if you use an accountant to handle your tax affairs.

If, however, you’re handling the complaint yourself, it will deal directly with you.

Obviously, you can contact your MP at any time you feel that you are not receiving the service to which you are entitled.

If you’re on self-assessment, at least you can correct any errors at the end of the tax year.

However, if you’re not you are reliant on HMRC to make the necessary correction on your behalf unless you take matters into your own hands and follow this up yourself, or pay an accountant for help if you feel this would be less stressful for you.

If you find that you have had a shortfall due to HMRC having information in its possession which it has not acted on then you can seek redress. If this happens I would advise seeking professional help from an accountant.

HMRC has no excuse for not getting your tax code right.

Although errors will occur, the fact that HMRC now receives monthly payroll information from your employer, a self-assessment tax return for those with businesses or more complex tax affairs and information from banks, as well as from many other sources, all concerning your income, never before has it had so much information available.

It now needs to make use of it properly. 

What kinds of tax code problems can arise?

I currently have a client whose tax code in 2018/19 was incorrect as a change in their circumstances was not reflected in their code, despite many calls to HMRC.

The code was incorrect up to and including 2020/21. In 2021/22, the code was corrected, but in 2022/23, the issue arose once more.

This person came to see me as they were at their wits’ end. We are still awaiting a response from our initial correspondence dated 7 October 2021 and three further letters sent subsequently to this date.

Another client filed their P11D correctly and included the claim for expenses incurred ‘wholly, exclusively and necessarily’ in the course of their duties.

HMRC treated the expenses as a taxable benefit and deducted them from their tax code meaning they paid too much tax in the year in question. This has happened on many occasions, despite the correct claim being submitted.

I also had a client who made a one-off personal contribution to their pension. They were a higher rate taxpayer so obtained further tax relief on the contribution.

The following year, the tax code was adjusted to take account of another one-off pension contribution which they did not make. As they were on PAYE, they did not realise and ended up with a large tax bill which they didn’t expect.

Are you trying to get a longstanding tax code problem resolved with HMRC? Write to [email protected] putting TAX CODE in the subject line, and tell us your story.