UK Tax News from TaxPenny

Millions of people are being taxed more than they should due tax coding notice blunders by HMRC. People mainly affected include pensioners and those with more than one source of income where the taxation is more complicated to begin with.

The tax coding notice provides each taxpayer with their tax code for a particular tax year and by decoding this the correct tax allowances and tax bands are applied. Due to the ‘Paye As You Earn’  nature of tax collection those with more than one job may have a zero tax free allowance on the second income source with all income shifted to the basic or higher rate taxation depending on the amount of income from the first job.

Unfortunately, due to the shift to a new system for issuing notices, people with historic records of having more than one income source were sent zero allowance or reduced allowance codes - even though their income situation may not warrant this.

We reported on this previously at the time when coding notices were being issued, but have followed up the story as HMRC reveals that this error has now resulted in £238 million being overpaid by taxpayers.

As before, if you would like to check your tax code you can at our tax calculator. You can also check the tax on two income sources.