Employee personal liability for PAYE or NIC

Produced by a Tolley Employment Tax expert
Employment Tax
Guidance

Employee personal liability for PAYE or NIC

Produced by a Tolley Employment Tax expert
Employment Tax
Guidance
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Under the Taxes Management Act 1970, an individual is under a general legal obligation to inform HMRC of changes in their personal circumstances that may affect their tax status or the amount of tax that is due. The introduction of self assessment under Finance Act 1994 and Finance Act 1995 resulted in employees having to take responsibility for their PAYE affairs as well as their other financial circumstances which may give rise to an additional income tax liability (or claim for a refund) or capital gains tax, etc.

For employees, their tax situation is often straightforward and the correct amount of income tax is deducted via the PAYE system. However, there may be circumstances where too little tax has been deducted by the employer from the employee’s pay.

Establishing the obligation to pay personal tax due

If a tax underpayment arises, it may be necessary for HMRC to establish which party is responsible for this. As a starting point, it should be recognised that PAYE is not an exact process, rather it is intended to be a deduction made on account of an employee’s personal tax liability. The actual tax due may well differ

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  • 01 Jul 2025 12:40

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