Although HMRC is taking steps to help those who can’t afford to pay their bills, it’s changed its system to collect some tax sooner. What’s the full story?

Unpaid self-assessment tax. Several years ago the law was changed to allow HMRC to collect unpaid self-assessment tax bills by adjusting individuals’ PAYE codes. Until recently, where HMRC made these adjustments it would do so from the start of the tax year following that in which it decided to make the coding adjustment.

Example. If, say, by August 2019 you hadn’t settled a self-assessment bill of £1,200 due on 31 January 2019, HMRC might adjust your code for 2020/21. As a result, each time you were paid (assuming a monthly salary) on or after 6 April 2020 HMRC would collect an extra £100 in PAYE tax. In fact, it would be slightly more than £100 as HMRC would have added interest to the debt.

Accelerated payment. HMRC’s new approach is to adjust codes earlier and so collect the tax sooner. In a similar situation to the example above, but where the tax of £1,200 was due on 31 January 2020, HMRC may adjust your code for the current tax year (2020/21) instead of waiting until the next one. This would result in considerably more than £100 per month extra being deducted so that the full £1,200 (plus interest) is collected by the end of this tax year. However, there are limits on how much it can collect this way.

Trap. In early June HMRC warned that because this is the first year of the new system there’s a chance it might collect two unpaid tax bills from your current year’s salary, e.g. that which was due on 31 January 2019 plus that due on 31 January 2020.

Tip. If you have an unpaid self-assessment tax bill and don’t want HMRC to collect it from your salary via PAYE, contact its payment helpline and arrange time to pay (see The next step ).

If you don’t pay a self-assessment tax bill on time HMRC can adjust your PAYE code to collect it from your salary. It now plans to do this much sooner. If you want to avoid this you need to contact HMRC and arrange time to pay.

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