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What is a tax calculation?

A tax calculation is created by HMRC if you have not paid the right amount of tax. HMRC’s annual reconciliation of PAYE for the tax year 2020-21 is now almost complete. HMRC use salary and pension information to calculate if you have paid the correct amount of tax.

The tax calculation is usually generated automatically by HMRC’s computer systems on what is known as a P800 form. P800s are generally sent out after the end of the tax year and the process is generally completed by the end of November. The P800 form is also used if you have not paid enough tax so be sure to read the document carefully.

If you are due a refund, the P800 form will usually tell you that you can claim a refund online. Once you complete the claim online, the refund will be paid within 5 working days and will be in your UK account once your bank has processed the payment. If you do not claim the refund online within 45 days, HMRC will send you a cheque.

If your P800 tells you that you will be repaid by cheque, then you do not need to take any further action and you should receive a cheque within 14 days of the date on the P800 Tax Calculation.

If you have not received a P800 form but think that you have overpaid tax, you can contact HMRC to inform them. If HMRC agrees that you are due a tax refund they will send you a P800 form.

If you complete a Self-Assessment return, then you should not expect to receive a P800 form as any underpayment or overpayment of tax will be handled by way of your tax return.

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Autumn Budget 2021 – Minimum Wage increases

The Chancellor of the Exchequer, Rishi Sunak, confirmed that the government has accepted in full the proposals of the Low Pay Commission for increasing minimum wage rates from 1 April 2022. This puts the government back on track to reach its minimum wage target of two-thirds of median earnings by 2024.

The new National Living Wage (NLW) rate of £9.50 will come into effect on 1 April 2022, representing an increase of 59p or 6.6%. The NLW is the minimum hourly rate that must be paid to those aged 23 or over. The threshold is expected to be further reduced to 21 by 2024. The increase represents a pay rise of over £1,000 for someone working full-time and earning the NLW.

The hourly rate of the NMW (for 21-22-year-olds) will increase to £9.18 (a rise of 82p or 9.8%). This increase narrows the gap with the NLW and leaves this age group on course to receive the full NLW by 2024.

The rates for 18-20-year-olds will increase to £6.83 (a rise of 27p), and the rate for workers above the school leaving age but under 18 will increase to £4.81 (a rise of 19p). The NMW rate for apprentices will increase by 51p to £4.81.

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