Tax Rebates & Refunds

How to take care of tax underpayments?

February 11, 2011
Posted in Tax Rebates — Written by Geoffrey

If you pay less tax than you should have done, then it is referred to as “underpayment” of taxes. In such scenarios, HM Revenues and Customs will contact you and put a plan in place for collection of owed tax from you. There will be an interest levied on this tax amount. Below is a discussion on some general scenarios.

If the underpayment of taxes is less than £2,000

HMRC will issue a new tax code to you and start collecting through this. You will therefore repay the tax over the course of the year. They also offer you an option of making a voluntary payment in one lump sum.

If the underpayment is in excess of £2,000

HMRC will give you until 31st of January in the year successive to the taxed year. You will receive a letter from HMRC and can either make a voluntary payment or complete self assessment.

If you are not in the financial position to pay right now

Write a letter to the tax office and explain reasons why you are not able to pay off the debt immediately. Give them figures about your income, expenses, savings and other expenses, if any. In some cases, they may ask you to declare your assets and their worth. Your situation may be taken into consideration and HMRC may allow you to break down the payments over 12 months.

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