We are now at the point in the year when some of your employees might receive notice from HMRC that they have underpaid tax for the prior year, by receiving a P800 form in the post.
Naturally, when an employee receives such a notice, their first point of call is usually management, before being swiftly transferred to the payroll team.
Why does this occur?
The simple answer is week 53 payroll, period 13 Payroll or 27 fortnightly payroll. Seems a little strange when those numbers don’t match an annual calendar, but let me explain a little further…
What happens in week 53?
In 2024/2025, there were 53 weekly pay periods in a 52-week calendar year. To ensure employees do not receive less take-home pay, payroll software (following HMRC guidelines) will allocate an additional tax-free period if their tax-free allowance has been used.
The personal allowance in 2024/2025 and for 2025/2026 is £12,570.00, if allocated a tax code of 1257L. For an employee with a tax code of 1257L, they are allocated a tax-free allowance of 12570/52 = £241.73.
When processing payroll, tax is calculated after the personal allowance. By the end of week 52, employees will most likely have used their allowance.
In circumstances where the full tax-free allowance has not been used, payroll software will simply move forward and use any allowance that is available.
How does HMRC deal with the tax underpayment?
No one likes to receive a red letter through the door, but the P800 form is issued to employees advising that they have underpaid tax, but with very little explanation as to why this has happened.
HMRC may adjust the employee’s tax code in the next tax year to reduce their tax-free allowance and to collect this tax liability.
What should employers do if an employee receives a P800 form?
If you are happy with the calculations, let the employee know they have been taxed correctly based on HMRC guidelines and to ensure their take home pay is protected.
In today’s fast-paced business environment, partnering with our payroll bureau means more than just timely payslips – it’s about gaining peace of mind, reducing risk, and freeing up valuable time to focus on what matters most: growing your business. With our expert team, secure technology, and commitment to accuracy and compliance, you can trust us to handle your payroll with the professionalism and precision it deserves.
Let us take care of your payroll, so you can take care of your people. Contact us today.
Disclaimer
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.