The PAYE tax system is now working as it should…

I was invited to appear on BBC 3 Counties radio twice yesterday to explain some of the facts behind the big PAYE tax news story. Sadly I could not phone reception at either of the appropriate times but here are extracts from the notes I made in preparation for the interviews. I would never have been able to cover all of these points of course:

• No – this is not a deliberate attempt by HMRC to sting taxpayers as part of a ‘let’s collect as much money as we can’ approach [A suggestion put to me by the researcher who had called]. More people are due refunds than appear to owe money to the taxman anyway.

• The new PAYE computer system has brought these errors to light. There have always been unders and overs as the PAYE system isn’t perfect. This year we know about them all and the new system makes it more likely they will be resolved faster than in previous years. So in some ways its a good news story. HMRC changing their systems to try to get things less wrong than in the past!

• References to a figure of 10m people due tax rebates are wrong. HMRC have said 4.3m have overpaid in the last 2 years and 5.8m in earlier years. This is likely to be many of the same people.

• The PAYE tax system has been creaking for years. Not designed for people who change job more than once a year or who have more than one part time job at a time.

• Many of the people who owe money do so because they have a company car that was not properly taken into account in their tax code. And they probably know this and hoped they would get away with it.

• References to employers using the wrong tax code for an employee are a touch unfair. Employers use the tax codes issued by the taxman. If it’s wrong it’s because the taxman didn’t have or didn’t use the right information. Often the taxpayer hasn’t told the taxman everything they need to know.

• Tax Codes are not something that the taxman and employers can work out between themselves