Millions of taxpayers hit by income tax mistake

Have you been affected by HMRC’s tax blunder?
It was revealed recently that almost six million people in the UK have paid the wrong amount of income tax over the last few years due to discrepancies in the Pay As You Earn (PAYE) tax system.

Whilst almost a million and a half people will face tax bills averaging £1,500, over four million taxpayers will get a rebate having paid too much tax.

How the errors occurred

A new computer system installed by HMRC has found discrepancies between the information held on HMRC records and the amounts deducted in tax and National Insurance by employers using the PAYE system.  Most commonly, these discrepancies occur when:

  • You have more than one job
  • You change job during a tax year
  • You have a company car
  • The wrong tax code is being used

An appeals process will be put in place for taxpayers to query the demands.

Billions of pounds involved

Since 2008, around £2 billion of tax was underpaid and so an unlucky 1.4 million taxpayers face a bill.  These taxpayers will have their tax code altered in the 2011/12 tax year to recoup the money.

On the flipside, around £1.8 billion has been overpaid and this will result in a rebate for over four million people.

It is believed that some people may have both overpaid and underpaid which may result in a rebate cancelling out underpaid tax elsewhere.

An HMRC spokesman told the BBC, “The overwhelming majority of PAYE cases – over 40 million – are right, so most people have paid the right amount of tax.  But for a variety of reasons in some cases there will be a discrepancy.

“The government accepts that the way we go about deducting tax at source needs to be much more accurate and the introduction of the NPS [computer system] paves the way for a real time system which in turn boosts accuracy.”

Benefits also affected

As well as the possibility of facing a tax bill, some families could also face having to repay some benefits as these may have been incorrectly calculated.

John Whiting, from the Chartered Institute of Taxation, said, “It is very difficult to go back and claim benefits you underclaimed, whereas, as demonstrated, if you owe tax it is possible for the revenue to back claim these.”

What happens next

HMRC are sending letters out over the next few weeks and months to the taxpayers affected by the mistakes.  These will detail whether people have overpaid or underpaid tax, and how any unpaid tax or rebate will be dealt with.

7 comments

  1. Vee says:

    just received a letter notifying me of a shortfall of a ridiculous £27000.00 in taxes for past 3 years.What do I do because it is not my fault or responsibility it is their mistake at the end of the day where do I get such an amount of money in such hard times.

  2. Sally says:

    I have just received two underpaid tax bill which amount to 3,200. I think it’s wrong. Is there anything i can do?

    • TaxFix says:

      Sally: You can contact your local tax office and ask them to break down the calculation and compare it to your records and then contest it if you do not agree.

  3. Gemma Woods says:

    could you please tell me about the form that i read about recently about a little used tax law that explains to the tax office that i have provided all the correct information to them and that any tax shortfall is their responsibility

  4. andrew says:

    how do we know whether we we owe the tax office or due a refund

  5. Gordon Miller says:

    When should wI know whats happening?

  6. Gordon Miller says:

    When will the letters arrive and how can I check my status?

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