More than five million workers have paid the wrong amount in tax, the majority of whom are now facing repayments to HMRC.
An estimated 3.5 million paid too little tax through the Pay As You Earn (PAYE) system in 2013-14 and now have to pay the money back over the coming years.
Despite the introduction of the £273 million “Real Time Information” (RTI) programme, the estimated number of errors in the tax system is on the rise.
The tax man has started writing to around 5.5 million taxpayers to tell them they paid the wrong amount of tax through PAYE last year.
Around two million people paid too much and will be able to claim money back from HMRC.
Tax officials estimate the average error will be £300.
Discrepancies arise because the PAYE system only checks tax paid against tax due and doesn’t take into account any pay rises or job changes.
Under the RTI system employers report wage payments to HMRC on a weekly or monthly basis. The new system, criticised as cumbersome by some businesses, will have cost taxpayers at least £273 million by next year, official figures show.
Kate Upton, a payroll consultant, said:
“Taxpayers have spent hundreds of millions on RTI and employers have had to spend hundreds of millions to use the new system, so we are entitled to expect significantly fewer errors in the reconciliation process.”
A spokesperson for HMRC said the effects of RTI haven’t yet been reflected and the increase in corrections last tax year are largely due to the increase in the number of people in employment.
Photo by Chris Isherwood