HM Revenue and Customs has overcharged British workers £3.5billion in income tax over the past year, leaving 5.6 million people out of pocket, according to figures from national accountancy firm UHY Hacker Young.
The accountancy firm has issued a stark warning that HMRC bears "under no obligation" to scrutinise individual accounts and tax returns to alert people when they've been overcharged. UHY Hacker Young is urging taxpayers to personally verify they aren't being overcharged via the PAYE system.
Should you have settled too much or insufficient tax by the conclusion of the tax year (5 April), HMRC will dispatch either a tax calculation letter (previously known as a P800) OR a Simple Assessment letter.
This correspondence will outline the process for claiming a refund or settling any outstanding tax. UHY Hacker Young attributes this systematic overcharging through PAYE primarily to HMRC distributing inaccurate tax codes.
Neela Chauhan, Partner at UHY Hacker Young, said: "Millions of people are paying the wrong amount of tax simply because HMRC is almost guessing what they earn. For too many people, this will go completely unnoticed.", reports Birmingham Live.
Chauhan adds: "HMRC won't always correct overcharging mistakes automatically. If you don't check your tax code or your PAYE calculation, you may never get your money back. The onus is on taxpayers to spot HMRC's errors."
"Individuals must check their tax codes and year-end PAYE summaries for mistakes. Particularly those with any form of non-PAYE income or company benefits."
Tax codes are a mix of numbers and letters assigned by HMRC, which determine the amount of income tax people pay through the Pay As You Earn (PAYE) system.
The most prevalent tax code for the current tax year across the UK is 1257L. This represents the standard personal allowance of £12,570, which is the threshold for tax-free earnings, as confirmed by the latest documentation from HMRC.
HMRC updates its records due to changes in benefits or tax-deductible expenses. When an update takes place, HMRC will inform the taxpayer via a P2 notice, formally known as a 'Notice of Coding'.
Employers and pension providers also receive updated notifications electronically, allowing them to apply the new code through their payroll systems.
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