Six million face PAYE tax shock

Nearly six million people will be informed over the coming months that they have paid the wrong amount of tax, with about 1.4 million facing demands for more payments, it was revealed today.

A total of £2 billion has been underpaid through the Pay as You Earn (PAYE) system over the past two years, meaning that the 1.4 million taxpayers will be required to pay out an average of almost £1,500 each.

Meanwhile, 4.3 million people will have better news, with the taxman telling them that they have paid too much.

With a total overpayment of £1.8 billion, each could receive an average rebate of £418.

The first 45,000 letters from HM Revenue and Customs are expected to arrive on doormats on Tuesday.

Some 30,000 will alert taxpayers that they are due a rebate and 15,000 telling them that they have underpaid and will have their tax code altered next year to claw back the money.

Millions more letters will go out by Christmas to the rest of those caught up in the blunders.

With an average additional payment of £1,428 being demanded, those affected by underpayments could be more than £100 a month worse off next year while the cash is recouped.

But it is believed that in some cases, individuals may face both under- and overpayments, which could cancel one another out.

In some cases, HM Revenue & Customs will consider writing off demands where taxpayers can demonstrate that they provided all the information necessary to calculate their tax correctly.

The problems arise because at the end of each year, HMRC checks that the amounts deducted in tax and national insurance by employers using the PAYE system mach up with the information held on their records.

In the past, this was done manually on a case-by-case basis, but a new computer system has now been introduced to automate the checks.