HMRC’s blunder over employees’ tax codes

It has been announced that HMRC has issued a whopping 25 million PAYE tax codes for 2010/2011, double that of the previous tax year, as a result of having moved into a new computer system. However, according to the Chartered Institute of Taxation, a substantial proportion is wrong!

May we use the opportunity to urge both employers and employees to check their new codes on coding notices they receive and never assume that what the taxman sends is correct, especially for employees with multiple employments or pensioners who work part-time. Furthermore, HMRC may try to collect tax on an individual’s investment income through their PAYE tax code. After all, any errors are likely to result as much in tax overpayments (and hence reduction in their take-home pay) as in underpayments, which eventually will have to be put back.