Some 5.5 million people overpaid or underpaid tax last year, HM Revenue & Customs has admitted. It means they will be clawing back up to £1bn from unsuspecting taxpayers for unpaid tax in the 2012-13 financial year.
But up to 3.5 million will receive an average repayment of between £350 and £500. That means HMRC will be handing back up to £1.75bn.
About 2 million taxpayers will receive surprise demands after the Revenue calculated they underpaid tax in the 2012-13 financial year. They will be asked to make up an average shortfall of between £400 and £500, although the Revenue said it allow the shortfalls to be paid during the 2014-15 tax year.
HMRC began the laborious process of contacting the millions affected on Wednesday after it started its annual PAYE End of Year Reconciliation process for 2012-13. With so many people to contact, some taxpayers won't find out whether they owe money – or are due a refund – until October.
An HMRC spokesperson explained: "Around 85 per cent of pay as you earn taxpayers pay the right tax throughout the year. But if a customer's circumstances have changed over the course of the year – if, for example, they have moved in and out of work, or received new benefits – we need to work out whether they have paid too much or too little tax. This is the normal process that the PAYE system has used for 70 years."
By Simon Read
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