Big bills loom following tax code error

Changes to the way HM Revenue & Customs (HMRC) works out and issues tax codes will mean many people could pay too much tax this year and be out of pocket.

 

With HMRC now issuing tax code notices for the 2010/11 tax year, everyone who receives their notice over the next few weeks is being advised to double check their tax code so they don’t get over charged.

 

The advice comes from Tony Moorby, director of tax at the Bristol office of PKF Accountants and business advisers who says that the sheer number of tax code notices that HMRC sends out each year means that very few receive the attention needed to ensure the correct amount of tax is collected from a person over the year.

 

Tony also warns that because of a new system being employed by HMRC the error rate will be higher than in previous years.

 

A new computer system at HMRC is believed to have sent out the wrong information to many taxpayers. It means that if the error is not spotted and changed by the time the new codes come into force in April, wrong information could be sent to employers and pension companies, leading to them deduct too much tax through the Pay As You Earn (PAYE) scheme.

 

Tony said: “Many people presume that the codes they receive from the taxman are right and never bother to check to make sure they are correct. But because of this new system many people are being sent codes that are wrong.  For example, the tax code for people who have changed jobs recently is being calculated based on them having two jobs!

 

“What has happened is that in some cases, the system appears not to have information on people who have recently left a previous job. It means people who have changed jobs during the past few years are being treated as if they have two jobs and are therefore earning much more money than they actually are.

 

“The result is that people are being given the wrong personal allowance as it is split between two jobs or allocated to a job they no longer have. It means their current employer will be told to deduct too much income tax from their pay.

 

“My advice is that anyone who receives their tax code over the next few weeks double checks what it says, especially those who may have changed jobs recently. If you think there is an error then get in touch with HMRC or an expert who can help you sort out the problem.”

To contact Tony please call 0117 906 4000.