PAYE90010 - Reconcile individual: underpayments: voluntary direct payments

The Voluntary Direct Payments procedures can refer to voluntary payments for

  • Coded out underpayments following end of year reconciliation
  • Customers can send a voluntary payment to pay all or part of an underpayment that is successfully coded into a future year.
  • Underpayments that cannot be coded out up to and including tax years 2016 to 2017
  • From 2016 to 2017 Simple Assessment has been introduced as a legislative method of collecting underpayments on PAYE that cannot be collected by a tax code. This will replace the current voluntary payment process where there is an underpayment which cannot be coded.

If an individual prefers to make payment directly rather than have any underpayment included in their tax code they can make payment either

  • Online, using a credit/debit card or bank transfer.  The P800 tax calculation will advise customers if they can do this online
  • Directly by bank transfer
  • By cheque

If an individual makes a direct payment with a cheque or bank transfer outside of their online account, they will need to include the relevant 17-character payment reference number.  Accurate reference numbers allow us the automated allocation of the payment against their record.  This consist of their

  • National Insurance number
  • The form reference P800
  • And the financial tax year starting in which the underpayment arose

For example, if he underpayment is from the 2024 to 2025 financial tax year, the appropriate reference would be AB123456CP8002024.

The procedure can also be used to collect tax arising on income received by the estate of a deceased person during the period of administration. These payments will not be accounted for on the PAYE Service.

Where a year is reconciled underpaid and a voluntary payment exists on a record which covers the amount underpaid, this will be set against the new reconciliation result.

Where a voluntary payment exists on a year which is reconciled underpaid the system will check

  • Where the voluntary payment is more than the underpayment value (including tolerances) the system will allocate the payment and repay the remaining value to the customer
  • Where the voluntary payment is less than the underpayment amount and reduces the underpayment amount to a value within PAYE tolerance the year will be reconciled balanced
  • Where the voluntary payment is less than the underpayment amount and reduces the payment to a value which can be coded, the voluntary payment will be allocated and the remaining underpaid amount collected via the tax code
  • If the remaining underpayment cannot be collected via the tax code a Simple Assessment charge will be created for the full value of the underpayment and any existing voluntary payment will be repaid to the customer

Where a customer wants to pay an In Year Adjustment directly and the In Year Adjustment arose in CY, offer the customer a cumulative code. If the In Year Adjustment arose in CY-1 (for example, it is currently being collected through the customer's code) and the customer is unwilling to wait for auto reconciliation before making payment, offer the customer an early review. The customer will need to send in any documents we need to make the review.