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Understanding and checking your tax calculation

If you receive a tax calculation, it's important to check it. The figures it shows are used to work out your tax bill. This is sent later (the 'Self Assessment Statement'). So if the tax calculation is wrong you need to tell HM Revenue & Customs (HMRC) right away.

Receiving your tax calculation

You'll only get a tax calculation (form SA302) if:

  • you sent in or made an amendment to a paper tax return and asked HMRC to work out your tax
  • you sent in a tax return, but HMRC doesn't agree with your calculation

Your tax calculation covering letter

The covering letter tells you about:

  • the tax year the calculation refers to
  • the 'Total Income Tax due' for that tax year - taken from the accompanying calculation pages
  • any changes HMRC has made to the figures on your tax return
  • any 'payments on account' (advance payments) you'll need to pay for next year

The letter and accompanying calculation aren't a tax bill, but if any of the figures look wrong, you need to let HMRC know as soon as possible - see the section below.

If you think your calculation is wrong

It's important to check the figures and if you disagree with them to contact HMRC as soon as possible. You'll find the number to call on the tax calculation.

If you don't get in touch, HMRC will use the tax calculation figures on your 'Self Assessment Statement'. This is a statement that you receive later that asks for payment if you owe tax, or tells you that you're due some tax back.

If the figures are wrong you may end up paying too much or too little tax. If you pay too little tax, you may have to pay interest and penalties when the mistake is put right.

Understanding the entries on the tax calculation pages

Look at each entry in your calculation to make sure you fully understand it.

Income received (before tax was taken off)

This lists all your taxable income for the year - including the 'gross' amounts before tax was deducted for things like:

  • pay, minus any allowable expenses you can claim
  • any taxable benefits and expenses you received through work
  • profits if you're self-employed or a partner in a business partnership
  • savings interest
  • dividends (the amount shown includes the 10 per cent 'tax credit' - follow the link below if you're not sure what this means)
  • Tax on UK dividends

Total income on which tax is due

This is the income you received - explained above - minus any tax-free personal allowances and deductions to which you're entitled.

Income Tax due

In this section you'll see the rate of tax that's been applied to your pay, pensions, profits, investment income etc. Different types of income are taxed at different rates and income above a certain level is taxed at a higher rate of tax.

If you pay higher rate tax, adjustments may also be shown here to make sure you get the right tax relief for certain payments you've made. For example if you gave to charity using Gift Aid, you'll only have received basic rate tax relief (20 per cent) when you made the gift - so an adjustment will be made here to give you the extra tax relief to which you're entitled.

Total Tax due

This is the total tax due for this tax year after taking into account adjustments such as:

  • tax you've paid through your PAYE (Pay As You Earn) tax code
  • tax deducted from your savings income
  • refunds you've already received for the year

However the 'Total tax due' figure isn't necessarily the amount you’ll be asked to pay. This is because it doesn't take into account any payments that you may have already made direct to HMRC, for example payments made by Direct Debit or by cheque. It also doesn't take into account any amounts you may owe for earlier years. The Self Assessment Statement that will follow will tell you exactly how much you owe or are due back.

Other entries on the calculation

Other entries that you may see on your calculation may include:

Paying what you owe

As already mentioned, the tax calculation and covering letter aren't demands for payment.

But the tax calculation covering letter does tell you about:

  • the date by which any tax you still owe must be paid (this is also shown in the Self Assessment Statement that follows)
  • any 'payments on account' (advance payments) you'll need to pay for next year

If you don't receive your Self Assessment Statement before the payment due dates shown on the letter, you'll need to use your tax calculation and covering letter, together with previous statements, to work out how much tax you owe.

If you prefer, you can look up exactly what you owe online by registering for Self Assessment Online and using the 'View Account' option. You can do this even if you've sent your tax return on paper.

Please make sure you pay on time - you'll have to pay interest if you pay late.

If you think your payments on account look too high

Your covering letter may tell you that you need to make payments on account (advance payments) for the current tax year. If it does, these amounts will be based on the income shown on your tax calculation because HMRC assumes your income next year will be similar.

If your income has gone up you don't need to do anything - the payments on account don't need to change.

If your income has gone down, you may think that the payment on account asked for is too high. In this case, you can use form SA303 to ask for it to be reduced. Make sure you tell HMRC if your income goes back up, otherwise you may have to pay interest on any tax you pay late.

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