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Millions may be paying more tax than they should
TAXPAYERS are being urged to check how much they are forking out after it was revealed last week that almost 6m people could be paying the wrong amount.
A report by the National Audit Office said taxpayers may have overpaid by about £500m because of deficiencies in the pay-as-you-earn (PAYE) system, where tax is deducted from your pay packet. Mike Warburton of Grant Thornton, an adviser, thinks the system has become too complex, leaving it open to errors.
He said: “For many people, especially those who have moved from basic to higher-rate tax, PAYE is only ever going to be an estimation.” He advises people to check their tax code carefully. It should be sent to you once a year along with a booklet explaining the calculations. Warburton said: “Many people get a PAYE code and put it in the bin without realising the significance of it.”
Your code is worked out by taking what you earn and deducting the personal allowance — the amount of income on which you pay no tax — £5,035 this year for most people. But there is a different allowance for the over65s, so the first thing to check is that you have been allocated the right allowances.
People who have experienced changes to their working lives are most likely to be paying the wrong amount. You could, for example, have been put in an emergency tax bracket if you failed to hand in your P45 when moving jobs. Warburton said: “If you change jobs, or work abroad for a period, or had a company car but no longer have one — anything like that — you need to check if your code reflects your current circumstances. “If you get a tax code that just says BR — basic rate — you may be having more tax collected than you owe because you haven’t been allocated any personal allowances.”
You can find a guide to whether you have paid too much, and to making sense of your tax code at hmrc.gov.uk/ pensioners/haveyoupaid2.htm (not just for pensioners).
Alternatively, you can ring your local Revenue & Customs helpdesk for an explanation.
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