Problems with employers.

Most people trust their employer to get their tax right and usually there are no problems. But if things go wrong, it can leave you stressed, confused, or facing a tax bill you weren’t expecting.

If this is happening to you, you’re not alone. We’re here to help.

Here are some common problems with employers that might affect your tax – and what to do.

If your employer treats you as self-employed.

Some employers say workers are self-employed, even when they’re not.

This matters because if you’re self-employed:

• You have to pay your own Income Tax and National Insurance
• You usually have to do a Self-Assessment tax return
• You would not be entitled to important rights, like sick pay or redundancy pay

The problem is that some people don’t realise this has happened. They think they’re an employee – until HMRC asks for tax.

Whether or not you are self-employed is not a choice but depends on the nature of the work you do and your relationship with the employer. See below.

This often affects:

• Migrant workers
• People new to work in the UK
• Anyone unfamiliar with the UK tax system
  
  

When an employer doesn’t pay tax to HMRC.

Some employers go out of business. Others don’t pass on the tax they’ve taken from wages.

Sometimes this happens because:

• The business can’t pay its debts
• The employer submits incorrect payroll information
• Tax is deducted on paper, but never sent to HMRC
• The employer is treating you as self-employed when you are really an employee

If this happens, your payslip may be the only proof that tax was taken from your pay.

That’s why it’s really important to keep:

• Payslips
• P60s (the yearly summary from your employer)
• P45s (if you leave a job)

HMRC says you should keep payslips for at least 22 months after the end of the tax year. Many advisers suggest keeping them for longer, if you can.

Agency work and umbrella companies.

Agency work can be complicated.

Sometimes agencies pay workers through an umbrella company. This is meant to make things easier, but it doesn’t always work out that way.

You might find that:

• Fees are taken from your pay
• Tax is deducted in a way you don’t fully understand
• Money set aside for tax isn’t there when it’s needed

In some cases, people end up with unexpected tax bills, even though tax seemed to be taken at the time.

Rules around these arrangements have changed over the years. Some workers should be taxed as employees, even if they’re paid through an agency or another company.

Because of this, it’s a good idea to get advice before agreeing to complex setups like umbrella companies – and to get help if you’re already in one and something doesn’t feel right e.g. if you’re getting two payments each month instead of one.

What to do if you’re worried your employer isn’t paying your tax.

If something looks wrong with your tax, there are a few practical steps you can take.

Gather any evidence you have.

This might include:

• Payslips showing tax and National Insurance deductions
• A P60 for each tax year
• A P45 if you’ve changed jobs
• Bank statements showing what you’ve actually received

If you don’t have this, HMRC may assume you’re self-employed and ask you to pay the tax yourself – even if that doesn’t feel fair.

Check your employment status.

If you’re not sure whether you’re employed or self-employed, HMRC has an online checker that can give guidance.

The result isn’t final, but it can help you understand where you stand and what questions to ask next.

Get advice if there’s a dispute.

If HMRC disagrees with you – or you’re being asked to pay tax you don’t think you owe – it’s important to get specialist help.

These situations can usually be sorted. But they’re much easier to deal with when you’re supported.

If you’re able to, you can hire a tax expert to help you with your issues. Or, if you’re on a low income or have personal or health issues that make it hard to get the help you need, call our helpline.