AROUND 5.5 MILLION PEOPLE have paid the wrong amount of tax, with a significant number facing further payments to HM Revenue & Customs in order to make up the difference, according to numbers revealed by the taxman.
An estimated 3.5 million paid too little tax through PAYE in 2013/14 and will now have to pay back in future years, despite the introduction of real-time PAYE (RTI). Some two million overpaid and will be able to reclaim their money from HMRC.
The 5.5 million errors HMRC is estimating for 2013/14 is higher than last year’s 5.2 million.
A reduction in reconciliation is the long-term aim for RTI, but its staggered introduction has meant its impact has been limited. However, according to HMRC, the value of the average underpayment and overpayment has fallen by £50 in comparison to last year.
A spokesman for HMRC said: “There will always be end-of-year reconciliation due to the way PAYE works. Most people pay the right tax throughout the year, but there will always be a small percentage of the 41 million people in PAYE who have underpayments or overpayments at year end. This could be because they have moved jobs, received a number of different sources of income or received benefits-in-kind that were only reported at the end of the year.
“The effect of RTI is not reflected yet as it has not bedded in but, over time, RTI will help to reduce the number of cases that have to be reconciled. The estimates quoted for reconciliations in 2013/14 are based upon actual reconciliation numbers in 2012/13. We do not yet know what effect RTI will have had on reconciliations for 2013/14. As we adopted a staged process for employers using RTI, some will not have used RTI for the full tax year. We will not be able to measure any effect on reconciliations for 2013/14 until the end of this tax year (2014/15).That said, early indications show that processing is in line with our expectations.”
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I will feel slightly awkward when I write to the client who is about to receive a large invoice from the PAYE expert, offering him the fee protection going forward