One in three taxpayers could be paying the wrong amount of tax, new research has found.
A series of blunders by HM Revenue and Customs (HMRC) has meant that one in three taxpayers may not be paying the right amount of tax, according to research by UHY Hacker Young, the national accountancy firm.
The research found HMRC employees have made a number of “basic errors”. One of the most common mistakes being HMRC failing to tax employee benefits, such as company cars and private health cover.
This has resulted in millions of people underpaying their tax by thousands of pounds because they have been given the wrong tax code.
In 2012 the accountacy firm carried out similar research, which involved analysing hundreds of pay as you earn (PAYE) tax codes sent to its clients to see how many were incorrect. The research found about a quarter were incorrect, but a year on the amount of errors have increased to around 37pc, said the firm.
Roy Maugham, tax partner at UHY Hacker Young, said errors in the amount of tax taken out of pay packets by HMRC are a concern because most taxpayers do not realise they have received more money than they were otherwise entitled to. A couple of months later when HMRC realise the mistake they have made taxpayers are hit with an unexpected tax bill, which can end up being a significant sum.
For others the mistake will lead to them receiving a rebate for paying too much tax.
“Underpaying tax is more of a problem than people realise as it can be a shock to an individual’s cash flow when HMRC moves to claw it back,” said Mr Maugham. “The majority of people will have forgotten to make an allowance for this, and so their finances might be strained.
“Mistakes most frequently occur when someone has several sources of income, for example income from an investment as well as a salary and benefits from their employer, or where they have received a large one-off sum such as a dividend payment.”
There has been a number of tax code errors since HMRC introduced a new computer system in 2009. For the first time, it combined information on National Insurance contributions and PAYE.
A spokesman for HMRC said: “The numbers being cited are not correct, accuracy of PAYE coding notices is now 99pc. The vast majority of people are paying the right tax at the right time through PAYE.”