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.
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If you want to check your current payment position, you can use the Business Tax Dashboard. The dashboard allows you to see your current:
What you need to do about an underpayment to HMRC depends on whether what you have paid matches what's on your FPS and any EPS.
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.
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.
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.
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.
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.
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.
Once you provide a valid reason for the overpayment you can:
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
Benton Park View
Newcastle Upon Tyne
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.
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.
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.
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.