As many as 1.2 million people could be facing debt problems as HM Revenue and Customs (HMRC) reveals that there have been errors with the Pay As You Earn (PAYE) tax system.
An internal audit into the PAYE system has uncovered a long list of wrong payments, with as many as five million people having paid either too much or too little tax on their earnings in 2010-11. Whilst a lot of people may receive tax rebates because of the error, a total of 1.2 million are believed to have underpaid by as much as £600 in the tax year ending April 2011.
To address the shortfall, it is likely that most of those who owe money will have £50 a month deducted from their pay until they are in the clear. This could lead to debt problems for those who are already struggling to make ends due to rising inflation and low wage increases.
HMRC is also planning to be less lenient on those who owe money than it has been in previous years. In 2010, the government department agree to not to pursue those who owed less than £300, whereas this year it will be chasing up unpaid tax of more than £50.
Accountancy firm Grant Thornton, which released the figures, expressed concern that the HMRC’s tougher tax debt recovery methods could affect elderly people more than others. Accountant Mike Warburton said:
“I have a particular concern about pensioners, not simply because many would find it difficult to pay the tax, but because they are often caught with underpayments.”
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