TAXING TIMES

Her Majesty’s Revenue & Customs wants all of us to check that the amount of tax deducted from our pay and pensions is correct. Because HMRC’s brand new £389 million computer system has been making a record number of mistakes.

If you have earnings or a pension and pay tax on it through PAYE then there is a good chance that the wrong amount of tax has been collected in past years. And the wrong amount may be deducted this tax year as well.

The Revenue has admitted it took £238 million too much off taxpayers in 2009/10. That figure is more than double the amount it over-collected the year before. And the National Audit Office says that 15 million individuals whose tax affairs are being looked at by the Revenue could have overpaid £3 billion over the past few years.

Checking your tax is not easy. Here is a list of warning signs.

• You had more than one source of income – such as two jobs or a job and a pension or two pensions
• You got a new source of income during the tax year, perhaps from a new job or retirement
• You were made redundant or became self-employed
• You lost a source of income – perhaps you retired or left your job – during the tax year
• You have a job which gives you benefits in kind such as a company car
• You are married and one of you was born before 6 April 1935
• You get a state retirement pension
• Your tax code has changed this year for no good reason.

Of course not all mistakes are in the Revenue’s favour – some involve taking too little tax off us. In 2009/10 £132 million too little was taken off some taxpayers. The National Audit Office reckons £1.4 billion has been undercollected through PAYE over the years. And before you cheer at the thought remember that if HMRC does start getting things right in future it may well come after you for the tax it missed. So it is better to check your tax and get it right now.

So check your tax code – which you should have got earlier this year. If there is anything about it you do not understand call the tax office number on the letter sent with the code. And remember that a tax code is a way of collecting tax not assessing it. So at the end of the year you should check that the tax deducted is correct. Yes it’s a difficult job. But you probably stand as good a chance of getting it right as the £389 million computer!

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