Page last updated at 16:14 GMT, Thursday, 4 February 2010

Warning on tax code mistakes from Revenue

HMRC tax form
There is still time to rectify any mistakes, HMRC says

HM Revenue & Customs has issued its own warning about mistakes in the tax codes currently being issued to taxpayers.

Coding notices tell taxpayers how large their personal tax allowance will be in the coming tax year, and how much tax their employers should deduct.

However, earlier this week the Chartered Institute of Taxation warned that many faulty or duplicate notices were being sent out.

Now HMRC has acknowledged that there is a problem.

The HMRC website says the problem is a temporary side-effect of the creation of a database in a new computer system introduced to manage the collection of PAYE and national insurance.

"The transition to the new [computer] system has, however brought to light discrepancies in our existing records and this is resulting in a number of incorrect notices being issued," HMRC said.

Sam is aged 45, is earning £12,500 for 2009/10, and has no other income
His personal allowance is £6,475
Subtract the £6,475 from the £12,500 and so the income Sam pays tax on is £6,025

"The vast majority of notices will be correct but there will be cases where, because the data carried over from our old systems does not match employers' data, some people receive an incorrect coding notice or more than one coding notice for the same employment because of these discrepancies."

HMRC repeated its earlier view that there was still plenty of time for people to check the codes in their coding notices and to tell them if there was something wrong.

"Anyone who is concerned that their code may be wrong should check it using the guidance included with the code and on our website," HMRC said.

The stance of HMRC was welcomed by Andrew Hubbard, president of the Chartered Institute of Taxation, which first spotted the problem.

"I welcome the fact that HMRC have moved swiftly to recognise that some problems exist with the new set of tax coding notices and have put up prominent guidance on their website," he said.

"We have passed on to HMRC, with the permission of those concerned, a range of examples of people who have contacted us who have been given incorrect tax codes."

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