People who were caught out by errors in HMRC's PAYE tax codes between 6th April 2006 and 5th April 2007 are to have the outstanding debts written off.
HMRC will cancel the debts of nearly 1.9 million people who, due to errors within the Paye As You Earn system, were unknowingly undertaxed.
The reason for the change of heart is due to the fact that HMRC only has powers to chase underpaid tax that is under 4 years old, unless there has been criminal activity. As a result, from 5th April 2011 these debts will not be recoverable.
This will be good news for the 1.9 million who were innocently caught out by this but the good news will not spread to the remaining people who have also underpaid tax.
The 1.9 million people were a small chunk of nearly 18 million taxpayers spanning 2004 to 2008. HMRC will still be proceeding with recovery efforts for those cases it is still able to.
If you are concerned about your tax payments we have a free tax calculator
website - you will be able to accurately calculate tax going back to 2003. If you enter your tax codes from any of these years, the calculator will check if your tax codes are correct and notify you of any mistakes and the amounts.
For more than one source of income, you can also use our compare tax on two incomes
calculator. Repeat calculation for two income sources and the tax codes will be checked for you. Check your tax codes