Up to three million people with more than one income, whether it be from pensions or PAYE employment, or in some cases both, are being allocated their personal tax free allowance multiple times. These people are at risk of facing backdated tax bills of £2,000 per year because of mistakes made by HMRC. These mistakes are only being discovered by HMRC years later, leading to unexpected tax demands.
Veterans who have taken a civilian job after leaving the Armed Forces are most likely to be affected as they may be drawing a military pension. Pensioners who have continued to work part time after retirement and those who have two pensions are also likely to be hit.
Taxpayers are being warned to check their paperwork thoroughly to make sure they are not affected before submitting their completed self-assessment tax returns before Jan 31.
The problems have arisen because many tax offices around Britain are failing to share information about taxpayers’ incomes on a central database.
HMRC have insisted that the problem is not “systematic” and says the vast majority of tax codes are correct, but accepts that millions of people have more than one code, which means they could be affected.