Will you get extra tax bill after HMRC mistake?

Millions of tax-payers will have to fork out an average £300 extra next year

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Around three and a half million people are set to receive a demand for more tax, after an admission by HM Revenue and Customs that it miscalculated payments through the Pay As You Earn system.

Despite the fact that HMRC has introduced a new £300 million computer system to handle payments, it took the wrong amount of tax from five and a half million people in 2013-14. While a lucky two million of these are now set to get a rebate later this year, many more will receive a demand for extra payment - averaging £300 each.


And the errors could have a knock-on effect on low earners, as the Department for Work and Pensions (DWP) uses the data to calculate Universal Credit. These workers may now see their entitlement fall.

The errors affect around one in eight people paying tax through PAYE - although HMRC dismisses this as a "small percentage". It says most of the errors have come about because of people moving jobs or receiving extra income or benefits.

But critics have pinned the blame, at least in part, on the introduction of the Real Time Information (RTI) system a year ago. At the time, the Treasury told MPs that RTI would "bring PAYE into the 21st century" and make it more accurate. However, errors are in fact up on the previous year.

The mistakes are particularly sensitive at a time when HMRC is soon to get the power to take money directly from people's bank accounts where they've been shown to have underpaid. The plan has already been criticised by the Treasury Select Committee, with chairman Andrew Tyrie pointing out that HMRC doesn't always get its calculations right.

"Giving HMRC the power to dip directly into people's pockets could be a recipe for disaster. HMRC don't get everything right first time, and any errors would become even more damaging for taxpayers under this system," says Andy Silvester, campaign manager at the TaxPayers' Alliance. "The government is right to demand everybody pay their fair share, but this is certainly not the right way to do it."

Tax payers can check that they've been given the right tax code by visiting http://www.hmrc.gov.uk/incometax/check-right-tax.htm#1. As HMRC says, most errors are caused by a change in the tax-payer's circumstances during the year, for example by moving jobs, getting a pay rise or receiving sick pay or maternity pay.

HMRC says it is now contacting those who have overpaid, and that cheques will be sent out by the end of September. Those who have inadvertently underpaid will have to make up the shortfall through PAYE payments throughout next year.