Whole thing is a total nightmare. Was going through the Wife's stuff last night as her car allowance figure was too high. Found out the P11D was wrong as her employer had got the dates wrong for a company car she wrote off, so had declared her as having two cars for ages
Well, that's not really HMRCs fault...
How it works is:
employer(s) submit P14s for your last years work. this contains pay and tax details. at the start of the next year PAYE estimates what you will earn for the coming year using that information. you get given a tax code that taxes you month on month. if you get paid more or less, or receive employment benefits etc, as long as you don't go into a new tax band you'll get taxed the same %age of your pay every month.
at the end of the year PAYE perform a reconciliation to understand if you have been paid the amount expected, and if you have paid the right amount of tax. The vast majority of people, 95% i think, fall into this bracket.
if you have paid too much you get a cheque, if you haven't paid enough it's either coded into next years tax code, so you pay it back over the next year, or if it's loads you'll get a Voluntary Payment Letter, saying 'give us money'
Well, that's how it used to work. Real Time Information now recalculates your tax code every month, as your employer now has to submit details about your pay and tax every month. Effectively removing the need for the final reconciliation.
guess what computer system i work on