900,000 have tax repayment demands written off
Thursday 09 September 2010
Nearly one million people who did not pay enough income tax have had their repayment demands written off, it emerged today.
An estimated 900,000 workers will not receive a letter from HM Revenue & Customs (HMRC) demanding extra money after the Government raised the threshold under which it writes off any tax that is owed from £50 to £300.
It is thought that 2.3 million people have underpaid income tax during the past two tax years due to errors in their Pay As You Earn (PAYE) tax code, but only 1.4 million of these will be chased for the money.
Those who will have to make up the shortfall collectively owe around £2 billion, or an average of £1,428 each.
But Exchequer Secretary David Gauke promised yesterday that the Government would make collecting the money people owed "as painless as possible".
People who owe less than £2,000 will be able to pay the money in monthly instalments taken from their salary during the 2011/2012 tax year.
Those who can show they are unable to afford to repay all of the money in one year will also be given the option of paying it back over three years.
Mr Gauke said: "In total, the Exchequer is owed approximately £2 billion. Being left with the worst deficit in peacetime history means we simply cannot afford to write off all of these underpayments.
"To ensure that the tax system is fair for everyone, where everyone pays their fair share, we are taking action to recoup these funds as painlessly as possible."
But those who owe more than £2,000 could be charged interest of 3% - six times higher than the Bank of England base rate - on the money they owe if they do not repay it within deadlines set by HMRC.
However, the 4.3 million people who are due a rebate, averaging £418 each, will be paid interest on the money they are owed by the Revenue of just 0.5%.
HMRC defended the interest rates it paid and charged, saying it had to charge interest on unpaid tax to encourage people to pay the money they owed on time.
A spokesman said: "The rate of interest on overpaid tax reflects the average commercial rate for a return on deposits. No commercial body has the same rates for both paying and charging interest.
"The rate of interest charged on unpaid tax is designed to encourage payment at the right time and to recompense the Exchequer for the loss on taxes paid late.
"If the interest rate on overdue tax was too low, it might encourage people to treat HMRC as a source of cheap credit. If the interest rate on overpaid tax was too high, it might encourage 'banking' with Revenue & Customs."
HMRC has begun sending out letters to the nearly six million people who are affected by the errors.
It plans to inform all those who have over or underpaid tax of the situation between now and Christmas.
Tax experts have said people who have underpaid tax may be able to get out of paying the extra money by asking for an Extra Statutory Concession, also known as an ESC A19.
People can do this if they can show they provided HMRC with all the information it needed to get their tax code right, but it did not use these details within 12 months of the end of the tax year in which they were received to claw back the extra money.
However, ministers have warned that the concession is only likely to apply in a minority of cases, and have urged people not to get their hopes up.
Every year, HMRC checks that the amount of tax and National Insurance deducted by the employer matches the information held on its records.
The wrong amount of tax may have been paid if people failed to tell HMRC about a change to their circumstances, such as starting a new job, having more than one job, or receiving a new benefit through work, such as a company car.
In some cases the wrong tax code will have been used because HMRC failed to act on information it was given, but in other cases it will be the fault of companies for not passing on changes to employees' circumstances to the Revenue, or the fault of the individuals themselves.
A high number of errors have been thrown up this year due to the use of a new IT system, which holds all the information on an employee in one place, rather than having it spread over several different systems, making it easier to spot discrepancies.
However, the new system should mean that going forward more people pay the right amount of tax through the PAYE system than previously.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Cyclist who knocked down three-year-old girl says his life has been 'destroyed'
- 2 A politically correct lefty goes to see Top Gear live – you'll probably believe what happened next
- 3 Young Preston fan has play-off hero Jermaine Beckford's shirt stolen from him at Wembley - which then appears for sale on Gumtree
- 4 Isis burns woman alive for refusing to engage in 'extreme' sex act, UN says
- 5 Puerto Rico, island of lost dreams: People are leaving the debt-hit territory in droves as near neighbour Cuba's star rises
As a white man, I'm surprised more women aren't tweeting the hashtag #KillAllWhiteMen
Scotland may have to leave the EU even if it votes to stay in, David Cameron confirms
The day that Britain resigned as a global power
SNP fury as HS2 finds 'no business case' for taking fast train service to Scotland
EU referendum: David Cameron to deny EU migrants and under-18s the chance to vote
A nation of inequality: How the UK is failing to feed its most vulnerable people
iJobs Money & Business
£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...
£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...
£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...
£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...
Day In a Page
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof