A jump in the number of people paying the wrong amount of tax has prompted a warning from DSH Chartered Accountants & Business Advisors.
According to new figures 5.5 million people paid incorrect levels of tax in the last financial year – up 300,000 on the year before despite the implementation of real-time PAYE (RTI) filing by HMRC.
For 3.5 million of them it means they face the prospect of further payments to make up the shortfall, while 2 million people stand to enjoy a refund.
“The significance of these figures is that they come when HMRC has introduced measures to improve the accuracy of reporting. While it is still early days for RTI, the fact so many more tax payments were incorrect puts a big question mark over the possible success of this scheme,” said Steve Carpenter, Director of Taxation at DSH in Maidstone.
Talking to tax advisers early if there is any change in your circumstances and making sure information is provided to HMRC on time and in full are the best ways to lessen the chance of miscalculation.
Steve explains: “If, for example, you change your company car part way through the tax year then your level of benefit may also change. We would be able to arrange for that change to be reflected immediately, minimising the likelihood of an error at the end of the year.
“We would also advise employers to make sure they let the tax authorities know the details of new recruits as soon as possible – as well as any other staff changes – and file all payment summaries promptly.”
Commenting on the number of discrepancies, HMRC said: “There will always be end-of-year reconciliations due to the way PAYE works.
“Most people pay the right tax throughout the year, but there will always be a small percentage of the 41 million people in PAYE who have underpayments or overpayments at year end. This could be because they have moved jobs, received a number of different sources of income or received benefits-in-kind that were only reported at the end of the year.
“The effect of RTI is not reflected yet as it has not bedded in but, over time, RTI will help to reduce the number of cases that have to be reconciled.”
To talk to DSH Chartered Accountants & Business Advisors, visit www.dsh.co.uk or call 01622 690666.