File your tax return by 30 December 2021 to have underpayments coded out

The deadline for filing your 2020/21 self-assessment tax return is midnight on 31 January 2022. However, if you have underpaid tax and you are employed and would prefer HMRC to collect that underpayment through your tax code, you will need to file your return online by midnight on 30 December 2021. You can also have an underpayment coded out if you filed a paper return by 31 October 2021.

Paying tax through your tax code

If you owe tax for 2020/21, rather than paying the underpaid tax in full by 31 January 2022, you may be able to have the underpayment collected through PAYE. This is done by adjusting your 2022/23 tax code (known as ‘coding out’). The effect of this is that collection of the underpayment will be spread throughout the 2022/23 tax year and deducted from your pay or your pension.

Conditions

The option to have a tax underpayment coded out is only available if all of the following conditions are met:

  • you owe less than £3,000;
  • you already pay tax under PAYE (for example, as an employee or on a company pension); and
  • you submitted a paper tax return by 31 October 2021 or an online tax return by 30 December 2021.

If you owe more than £3,000, coding out is unavailable; you will need to pay what you owe by 31 January 2022.

Talk to us

If you are likely to have a tax underpayment for 2020/21 and want to pay the tax that you owe through an adjustment to your tax code, talk to us about what you need to do to meet the 30 December 2021 filing deadline.