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HMRC internal manual

Employment Income Manual

Assessments, appeals and other procedures: assessments

Assessments not needed in most casesNearly all employment income tax is collected on a provisional basis through the PAYE system using code numbers and tax tables. Tax is deducted from wages and salaries by the employer and paid over to the collector. The code number can take into account other employment income from which tax cannot be deducted directly, such as benefits in kind. Small amounts of other income can also be effectively taxed through PAYE by setting allowances against them and only giving any balance in the code number.

So, for most taxpayers whose income is wholly or mainly employment income, where the PAYE coding notice is accurate and deductions are made in accordance with cumulative tax tables, the total net tax deducted will be correct so that no further action is needed. (The PAYE system is designed to marginally under-deduct to prevent large numbers of taxpayers overpaying very small amounts and then making repayment claims.)

Assessments are not needed when PAYE gets things right in the tax year.

In most cases where PAYE has not got things right in the tax year, matters are sorted out informally at the year-end rather than by assessment. Under the informal procedures that have existed for many years, over-payments are repaid automatically and under-payments, up to a limit (currently £2.000), are automatically coded out for collection through PAYE in a later year. The taxpayer is not disadvantaged in any way by the informal procedures. The saving to HMRC is simply in administrative costs, and the taxpayer is saved unnecessary work. These informal procedures, which are set up under the general power given to the Commissioners of Her Majesty’s Revenue and Customs to manage the tax system, are covered in the PAYE Manual at PAYE 93000 onwards.

However Section 711 ITEPA 2003 also gives taxpayers the right to self assess for any year.