HMRC tolerance on tax calculations

A tolerance has been used since the introduction of PAYE to accommodate the rounding up and down that automatically happens when the tax tables are used to calculate the deductions.

HMRC have applied a tolerance of £50 for at least the last two decades. This meant that when it checked the tax deducted for taxpayers at the end of each tax year, it would not take any action in respect of underpayments of tax less than £50.

In September 2010 the tolerance was temporarily increased to £300, covering the years 2007/08, 2008/09 and 2009/10. This was in the wake of the problems arising from the reconciliations carried out for those years using NPS.

The tolerance for 2010/11 will revert to £50.