Very few things produce the same immediate anxiety as a brown envelope from HMRC. The instinct to put it on a pile and deal with it later is understandable, but it is almost always the wrong call. Most HMRC letters are entirely routine. Some carry important deadlines. A small number require prompt action. The only way to know which category yours falls into is to read it.
Read it once without reacting
Read the letter through once before you do anything else. Note what it is about, what it is asking you to do, and whether there is a deadline. Many HMRC letters are informational. A change to your tax code. A reminder to file a return. A notice that a repayment is being processed. These require little or no action beyond checking the information is correct.
Check your tax code if the letter mentions one
Tax code letters are among the most common HMRC communications. Your tax code tells your employer how much tax-free income you get before tax is deducted. If the code is wrong, you may be paying too much or too little tax. Common codes to look out for: 1257L is the standard code for most employees in the current tax year. A code starting with BR means all your income from that source is being taxed at the basic rate with no personal allowance, which often indicates an error. An emergency code or 0T code similarly suggests something needs correcting.
If your tax code looks wrong, contact HMRC to have it corrected. You can do this online via your Personal Tax Account at gov.uk or by calling the HMRC income tax helpline.
Self Assessment letters
If you are registered for Self Assessment, you will receive annual letters reminding you to file your tax return and pay any tax owed. These have firm deadlines. The online filing deadline is 31 January each year, and missing it results in an automatic £100 penalty regardless of whether you owe any tax. If you receive a Self Assessment letter and are not sure whether you need to file, check HMRC's eligibility criteria or speak to an accountant.
If the letter says you owe money
A letter stating that you owe tax is worth taking seriously but not panicking about. Check that the figure is correct, paying particular attention to the tax year it relates to and whether any payments you have already made have been accounted for. If you agree with the amount and can pay it, do so by the deadline stated. If you cannot pay in full, HMRC operates a Time to Pay arrangement that allows you to pay in instalments. Contact HMRC as early as possible if you need this, before the deadline rather than after it.
If you think the letter is wrong
You have the right to challenge an HMRC decision. The letter should explain how to do this. For most decisions there is a formal appeals process. If the issue is complex or involves a significant amount of money, it is worth speaking to an accountant or tax adviser before responding.
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Ask Fin provides general guidance only, not regulated tax or legal advice. For specific tax queries, contact HMRC directly or consult a qualified tax adviser.