The annual audit on the UK’s PAYE records has revealed that an estimated 4.7 million people paid the incorrect amount of tax in 2010/11. Later this year, they will all receive letters detailing the amount that they owe or will be reimbursed.
This is not the first time HMRC have been publicly humiliated for taxation errors. Back in September of 2010, it was revealed that a staggering 5.7 million people had paid the wrong amount in taxes between 2008/2010. As a gesture of good will, those with underpaid tax bills of under £300 had the outstanding amount written off. However, this year the government will be enforcing tighter measures to reclaim any outstanding balances.
Worst hit by the latest blunder will be those claiming a state pension for the first time, some 160,000 people with average balances of £600. With outstanding balances of £50 or more being pursued this time around, there will be very little anyone can do to avoid these unexpected repayments.
Of those claiming a state pension for the first time, many were unknowingly continuing with their full personal allowances, meaning that underpayments in excess of £1000 were accumulated over the course of the year. Unfortunately for them, this will be deducted from an already meagre state pension. Mike Warburton of accounting firm Grant Thornton says, “I have a particular concern about pensioners, not simply because many would find it difficult to pay the tax, but because they are often caught out with underpayments”.
On the up side, a spokesperson for HMRC announced that a new computer system is now in place meaning that there should be fewer errors in the future. We shall have to wait and see.