HM Revenue & Customs (HMRC) are introducing a new tax collection method with effect from 6 April 2012 to collect unpaid self-assessment tax liabilities, personal pay as you earn (PAYE) underpayments and Tax Credit overpayments by taking it out of your salary. The new rule above only applies where a tax bill has become overdue and is in addition to the long standing practice which allows you to spread a PAYE or self-assessment tax liability by adjusting your tax code.

HMRC is allowed to do this where a tax bill is fully or partly unpaid and the amount owing is less than £3,000. They will be achieve this by amending your code number for a complete tax year and so in effect will spread the payment of the outstanding tax liability up to twelve months.

Also HMRC will separately demand interest on the outstanding tax debt be paid directly as they cannot collect this amount through PAYE. However taxpayers should challenge HMRC if they try to do this in respect of any disputed tax bills.