The good news is that 4.3 million of us are owed money by HMRC. Sadly, 1.4 million of us also owe them. Due to the incompetent introduction of a new computer system last year, 5.7 million of us were issued with the wrong tax codes. That meant we either over or underpaid our taxes.
The system has now been fixed (or so we are told) and the various mispayments added up. Anyone who has been caught up in the mess will receive a letter – not an email – between now and January informing them of the mistake. Then if you’re lucky you will get a cheque from HMRC for the amount other taxpayers owe you.
If you’re not, you’ll get a bill for the amount you owe. That might not be a nice experience. If you owe less than £2,000 you will be able to pay it in monthly instalments from your salary. But if you owe more you will be expected to pay it all at once in a lump sum. You might think that makes little sense, given that large sums of money are harder for credit-crunched taxpayers to find than small sums of money. We would agree.
And to make the whole thing worse the Treasury will be charging those who can’t pay straight away 3% interest – that’s six times the Bank of England base rate. Whereas if the Treasury admit to owing you money they will only be paying you 0.5% interest.
Is there any way out? Some tax experts are pointing to a clause in tax rules that states HMRC must inform people of tax mistakes within 12 months of the end of that tax year. With some of these mistakes dating back to April 2008 they believe this may be a way for some people to escape their bills. But David Gauke, the treasury minister, warns in The Times that people should not “build up their hopes”. Apparently most appeals against payment demands fail.
With tax receipts already much lower than the government would like, the HMRC isn’t much in the mood for leniency. They’ve agreed to waive any owing of less than £300 but everyone else will be made to cough up. So if you really can’t afford to pay your bills, all you can do is get in touch with HMRC and try to come to an arrangement.
There’s a lesson in here: you can’t trust big bureaucracies to get anything right so you need to keep an eye on your own tax code, along with everything else. This isn’t easy: the tax codes are less straightforward explanations of your status than “cryptograms”, says David Prosser in The Independent.
If you want to have a go figuring out what yours means, visit www.hmrc.gov.uk for a breakdown of its components.