Up to 3.5 million taxpayers are set to receive tax refunds from HM Revenue & Customs (HMRC), as the annual reconciliation of PAYE for 2011/12 begins.
The process, which is taking place two months earlier than last year, will see individuals who have paid too much tax receiving average repayment of £379.
However, around 1.6 million people will be informed that they have underpaid their tax, and will need to make up an average £537 each. The sum owing will normally be collected in instalments through the PAYE system.
While around 85% of individuals pay the correct amount of tax under PAYE, changes in personal circumstances during the year, such as changes to benefits in kind, moving jobs, or having gaps between periods of employment, mean that the remaining 15% pay too little or too much tax.
Stephen Banyard of HMRC said, ‘We are pleased that we are able to start this process more quickly than in previous years, giving money back to those we owe and delivering certainty to those with something to pay’.
The introduction of the new Real Time Information (RTI) system will require employers and pension providers to tell HMRC about PAYE payments as they are made, rather than at the end of the year, meaning that more people should pay the correct amount of tax.
However, some organisations have expressed concerns that smaller businesses could encounter problems with implementing the new filing requirements under RTI, due to a lack of resources and technical knowledge.
If we can help you with any tax and financial planning needs, including ensuring that your PAYE code is correct, please do contact us for further assistance.