If you've overpaid or underpaid in error

It's important that all your payments to HM Revenue & Customs (HMRC) reconcile with what you've reported on your Full Payment Submission (FPS) and Employer Payment Summary (EPS) or end-of-year return (forms P35 and P14) for a previous tax year.

If you have underpaid or overpaid HMRC in error in respect of PAYE (including Income Tax, National Insurance contributions (NICs), Student Loan or Construction Industry Scheme deductions), what you need to do depends on the type of error and whether HMRC has already been in touch with you about it.

This guide will tell you what to do in the most common situations where you have made an overpayment or underpayment in error.

On this page:

Checking your payment position

If you want to check your current payment position, you can use the Business Tax Dashboard - there's a link to find out more about this at the end of this section. The dashboard allows you to see your current:

  • PAYE payments and liabilities
  • VAT position (if VAT registered)
  • Corporation Tax or Self Assessment payments and liabilities (not both)

In most cases you should be able to use the dashboard information to reconcile any underpayments or overpayments, or to establish what you owe - and your own PAYE records should also help you to do this. But if, exceptionally, you do need to contact HMRC you must provide full details of payments made to HMRC and identify the payments you're querying. Write to:

HMRC
St Mungo's Road
Cumbernauld
Glasgow
G67 1YZ

Using HMRC's Business Tax Dashboard

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Reconciling PAYE charges

HMRC has provided the checklist below as a PDF (Portable Document Format). When you open it you can read it on screen, or print - it has the steps you can take to avoid some of the most common errors in reconciling your PAYE charge records with HMRC's.

Reconciling PAYE charges (PDF 32KB)

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If you have underpaid HMRC for a reporting period

What you need to do about an underpayment to HMRC depends on whether what you have paid to HMRC matches what's on your FPS and any EPS.

Amount reported on your FPS/EPS doesn't match the amount deducted from employees

If the underpayment is because there is an error on your FPS or EPS, it's important that you correct the return. For example, you may discover the underpayment to HMRC because you have underpaid your employee by mistake and you've corrected your payroll after making your returns to HMRC.

You must correct the error on the next FPS or EPS you submit and pay the total amount reported on the next FPS or EPS - this will bring your payments into balance.

Correcting payroll errors - current year

Payments and deadlines

PAYE/Class 1 National Insurance

PAYE/National Insurance late payment penalties

What happens if you can't pay

Amount reported on the FPS/EPS matches the amount deducted from employees

If the amount you've reported on your FPS or EPS matches the amounts you've deducted from employees and you've underpaid HMRC, you should pay the balance as soon as possible using your Accounts Office reference. For example, you may have paid £230 instead of £320 in error, but your returns are correct and show that you owe £320.

Any outstanding balance at the due date for the reporting period's payment could be liable to penalties and possibly interest.

Payments and deadlines

PAYE/Class 1 National Insurance

PAYE/National Insurance late payment penalties

What happens if you can't pay

Download 'At a glance: late filing penalties and appeals' (PDF 34K)

Download 'At a glance: interest on PAYE from 2014 to 2015' (PDF 37K)

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If you have overpaid HMRC for a reporting period

What you need to do about an overpayment to HMRC will depend on whether the overpayment matches what you've reported on your FPS or EPS.

Amount reported on your FPS/EPS doesn't match the amount deducted from employees

If your overpayment has been made because there's an error on your FPS or EPS, it's important that you correct the return. For example, you may have overpaid your employee in error and have corrected the mistake on your own records, but only after you've made your returns to HMRC. You must correct the error on the next FPS or EPS you submit but pay HMRC the amount reported on the FPS or EPS.

Correcting payroll errors - current year

Correcting payroll errors - previous year

Amount reported on the FPS/EPS matches the amount deducted from employees

If you've made an overpayment in error - for example you've paid HMRC £320 instead of £230 for a reporting period - but the amounts you've reported on your FPS or EPS are correct, it's easier to adjust the payment you make after your next return to bring your account into balance.

If you make payments quarterly or annually, or the amount of the overpayment is significant, you can ask HMRC to refund it to you by contacting the Payment Enquiry Helpline.

Payment Enquiry Helpline

From April 2014 if you want a PAYE overpayment repaid directly into your bank account, you should provide your bank account details on an EPS. HMRC will then use the details provided to repay any agreed repayment direct to your bank account and you'll get the refund more quickly. If your software does not have the EPS facility to report your bank details you should write to HMRC's Employer Office with the information. More guidance about providing your bank account details can be found by following the link below.

What payroll information to report

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If you have overpaid HMRC for a previous tax year

Identifying the reason for your overpayment

HMRC have produced a checklist to help you identify the reason for your overpayment. Work through the list of some of the common reasons why employers may be overpaid.

PAYE/CIS overpayment claims checklist

Dealing with your overpayment

Once you provide a valid reason for the overpayment you can:

  • have the monies repaid
  • offset the monies against a previous tax year (where there is an underpayment for that year)
  • offset the monies against other taxes owing, for example Corporation Tax

If you make payments quarterly or annually, or the amount of the overpayment is significant, once you have identified the amount and reason for the overpayment, you should write to HMRC's Employer Office at the address below or call the Employer Helpline:

Customer Operations Employer Office
BP4102
Chillingham House
Benton Park View
Newcastle Upon Tyne
NE98 1ZZ

Find contact details for HMRC's Employer Helpline

If the overpayment claim relates to multiple tax years you must provide justification for each year's repayment. If you don't, this could delay your claim.

If you fail to advise HMRC of what action you want to take, the funds will be offset against current year.

From April 2014 if you want a PAYE overpayment repaid directly into your bank account, you should provide your bank account details on an EPS. HMRC will then use the details provided to repay any agreed repayment direct to your bank account and you'll get the refund more quickly. If your software does not have the EPS facility to report your bank details you should write to HMRC's Employer Office with the information. More guidance about providing your bank account details can be found by following the link below.

What payroll information to report

Has the Company been dissolved or struck off?

If a company has been struck off or dissolved, HMRC cannot take overpayment claim requests over the telephone. The employer/authorised agent must provide the relevant information in writing.

Employers should consider repayment claims before dissolving their company. Further information can be found on the Companies House website.

Read about closing or dissolving a company on the Companies House website

What you need to provide to HMRC to claim an overpayment

Personal details:

  • employer name
  • employer address
  • PAYE reference
  • contact telephone number

Overpayment details:

  • total amount of the overpayment by tax year
  • in what month(s) the overpayment occurred (where possible)
  • why the overpayment occurred
  • has the overpayment already been claimed?

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If you have paid more than once in error

If you have paid more than once in error and haven't received a letter from HMRC, you can offset the amount you've overpaid against your next payment.

If you make PAYE payments each quarter or on an annual basis, or the amount is significant, you can ask for a refund. You should call the Payment Enquiry Helpline for more information.

If you have received a letter from HMRC about the overpayment, you should contact the office on the letter.

Payment Enquiry Helpline

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If you have used the wrong payment reference

If you have used the wrong payment reference and haven't received a letter from HMRC, you should contact the Payment Enquiry Helpline for advice. The Payment Enquiry Helpline may, in some circumstances, be able to transfer your payment to the right payment reference.

You can check your current year payment reference online by using the PAYE and Class 1 NIC current year reference checker.

If you have received a letter from HMRC about the payment, you should contact the office that sent you the letter.

Payment Enquiry Helpline

PAYE and Class 1 NIC - reference checker

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