HM Revenue and Customs reckons a million employees still owe it money for 2010/11, though many more can expect a refund
Up to 4.7 million people have paid the wrong amount of tax during the 2010-11 tax year, HM Revenue & Customs (HMRC) has revealed.
It estimates that about 1.2 million people have paid too little through the pay as you earn (PAYE) system, and owe an average of between �500 and �600, a total debt of around �660m.
A larger number will receive good news in the next few months: they have paid too much tax and will receive a refund. HMRC says that between 1.7 million and 3.5 million people paid too much, and will be sent cheques for, typically, just under �340.
The taxman will be hoping this disclosure will not trigger a repeat of the storm that blew up last September when it emerged that almost 6 million people had been caught up in what was dubbed a PAYE "tax blunder". The Revenue said: "We are in a happier place than we were last September."
Every year, HMRC checks that the amount of tax and national insurance deducted by employers matches the information on its records. Last year, the department was bedding in a new IT system which trawled through all the tax records and discovered millions of discrepancies. It is about to begin the process for the 2010-11 tax year.
The Revenue has long said the vast majority of the 40 million people who pay through PAYE are correctly taxed but, because people's circumstances change during the year, there will always be a minority who have paid too much or too little. Those most likely to be affected are people who have changed jobs, taken on an extra source of income, received a new benefit through work or retired.
HMRC said the range of 1.7 million to 3.5 million for those who have paid too much tax were "very much an estimate".
"We won't know [the precise figure] until we have crunched the numbers, which will start from mid-July." Those due a refund should receive it by the end of September. Last year the average overpayment was �340, but this year it is expected to be "a bit less".
The department will then concentrate on those who have underpaid tax. Last year the typical underpayment was �1,027.
The vast majority of those affected will not get a bill ? instead, their tax code will be changed. In effect, they will pay back what they owe via deductions from their salary during the 2012-13 tax year. By December, they should have received their "tax calculation" letter (form P800) giving more information. Note that HMRC is not referring to these as tax demands. "Most people have paid the right amount of tax so won't get a letter from us with a revised tax calculation. So don't worry if you don't receive a letter," it says.
Last autumn it emerged that many people who owed tax would have their underpayments written off, after HMRC said it would not pursue cases where the amount owed was less than �300, but this concession will not be in place this year, and the threshold has gone back to the standard �50.
The Revenue says it is sympathetic to cases of genuine hardship, and those who cannot afford to pay the tax should get in touch to see if it can come to some arrangement with them.
Source: http://www.guardian.co.uk/money/2011/jun/28/pay-as-you-earn-errors
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