Millions have been warned that they may “never see” overpaid tax money again, as £8.9 billion is overpaid. The Payment on Account system can lead to overpayment by charging tax in advance based on last year’s income, an expert has warned.
Around 2.6 million people who filed self-assessment tax returns paid an estimated £8.9 billion more than they owed to HMRC last year, according to research by accountancy firm UHY Hacker Young. Neela Chauhan, partner in UHY’s London office, says: “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.” It is imperative that people check how much tax they are paying, as HMRC now conducts fewer internal assessments to identify errors and overpayments.
Neela says: “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.”
Even when overpayments are identified, reclaiming the money can be slow and frustrating. Many taxpayers face long waits, with written requests often ignored and phone calls going unanswered.
HMRC’s coding assumptions often go unchecked because paper tax code notices are no longer routinely issued.
This means millions of employees may be unaware that their tax code is wrong and that they are being overcharged. Overcharging through the PAYE system largely stems from HMRC issuing incorrect tax codes.
If a taxpayer’s circumstances change and HMRC does not have the most up-to-date information, it will continue to deduct tax based on its own estimate of income without checking with the taxpayer.
