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PAYE rebates and demands for payment issued

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HM Revenue & Customs has started sending out letters to around 5.7m people affected by the PAYE tax code errors.

Earlier this autumn, the Revenue reported that around 4.3m people paid too much tax as a result of coding mistakes and are due refunds totalling £1.8bn, or an average of £420 per taxpayer; while 1.4m underpaid and will be asked to pay an additional £2bn, or an average of £1,428 per taxpayer.

The first letters telling taxpayers whether they will get a rebate or face having to pay extra money were sent out a couple of weeks ago.

People who have underpaid and owe less than £2,000 can ask to repay the money in monthly instalments taken from their salary over one to three years.

But those who owe more than £2,000 will be asked to pay it in a lump sum. If this is not possible, they will need to contact HMRC to discuss over payment options.

HMRC will not pursue cases where the amount owed is for less than £300, which applies to 40% of all underpayments.

Note also that if you gave the Revenue all the relevant information to work out your correct tax code, but it failed to use it within 12 months of the end of the tax year in which it received that information, you're entitled to ask for the tax to be waived through an "extra statutory concession" or ESC A19.

The tax code errors stem from miscalculations made by HMRC tax officials, which were identified by the introduction of a new computer system last year.

Angela Beech, of chartered accountants Blick Rothenberg, said: "It beggars belief as to how matters have been allowed to get out of control to this extent.

"The fact that it will take at least four years to clear the backlog means that no one can rest easy thinking that their tax position is correct. About half of the population could be affected. It's an absolute debacle."

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