Following on from my blog yesterday it appears that the income tax are sending out letter to 1.6 million people, give or take a few, to inform them that they either owe unpaid tax or that they have paid more tax than they should and will receive a cheque soon.

As I commented yesterday the principle of PAYE is simple and for most income earners, as it is all calculated by the income taxoffice and stopped at source by the employer, there is no worry about under or over paying tax.

Now it would seem that there has been a problem in the tax coding for the last tax year or so which means that many people have paid less tax than they should. The majority of wage earning tax payers know what their take home pay will be and any change would I am certain be noticed. However, if  it’s because the tax coding was incorrect  they are less likely to be aware as most people I imagine get their tax code, grumble about all the tax they are paying and that’s it. With changes to the allowances it’s easy for any individual to take no more than a cursory glance at their tax code. If it’s say 200 less than last year they are hardly likely to do an in depth analysis, relying on the tax office to have sorted it correctly.

Personally I only have taken an interest because in the past I have been given the wrong tax code and spent 2 years paying it back.  Also I have paid tax at 40% in the past and keep a sharp eye out for any changes to my tax coding or “take home” pay.

The good news is that if you have overpaid tax they will include interest at 0.5%. If you owe tax you can either pay it back as a lump sum or have it taken out of your pay through a tax coding adjustment. Could be some problems ahead if the system got it wrong a year ago and this year too.