Tax doesn’t have to be taxing.

Unless you are going to be one of six million people who have been paying the wrong amount of income tax, not a bad number for a Country with a workforce of 30 million people (and that number obviously includes people who are not on the PAYE tax system).

The amounts underpaid and overpaid pretty much net out. £1.8 billion has been overpaid. £2 billion has been underpaid.

4.3 million of those who paid the wrong amount of tax have overpaid. They will get an early Christmas present averaging £400.00. I can imagine that money will trickle out. I am still waiting for my refund of £500 due from 2 years ago.

The 1.7 million who have underpaid will face an average bill of over £1,500.00.

The error was found because HMRC have a new computer system dealing with PAYE. I do wonder how much of this “error” was caused by data conversion and not by the “inaccuracies” of the old computer system.

The Government suggests that arrangements can be made for those who owe over £2,000.00. For those who owe less than £2,000, HMRC will recover that over the course of the next tax year (2011/2012) through tax codes.

That means many of those 1.7 million people will face a tax hike of £180 a month.

Examples of those facing the tax hike, if you came off and on benefits as a result of starting work, changed jobs or had a new company car you are more likely to be getting a bill and rather less likely to be getting a refund.

Part of the “beauty” of the Pay As You Earn system is that you should never need to worry about big tax bills at the end of the year. You get paid. Your tax gets deducted. You go spend. That is why this error is so disastrous for people.

Tax doesn’t have to be taxing, for 1.7 million people it will now not only be taxing it will be a nightmare.

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