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U.K. tax system errors mean 3.5 million unexpectedly owe

June 26, 2014

The Internal Revenue Service can take a little solace in the fact that it’s not the only tax system having problems.

UK HMRC PAYE tax ad 2013 adHM Revenue and Customs, the United Kingdom’s version of the IRS, implemented an expensive new system last year that was meant to improve the tax system’s accuracy.

It didn’t work.

More than five million workers paid the wrong amount of tax collected through Pay As You Earn, or PAYE, similar to the United States’ payroll withholding.

Around two million British taxpayers paid too much, according to The Telegraph. They’ll be able to claim their overpayments from HMRC.

But the remainder with wrong PAYE amounts aren’t so lucky, reports the newspaper. The U.K. tax man says it needs to collect underpayments from around 3.5 million workers.

The owing employees can repay their too-low tax bills through PAYE next year.

Tax officials estimate that the average error is around £300; that’s $408 in U.S. dollars.

Expensive new program problems: In addition to the financial issues, the incorrect PAYE amounts have left HMRC with a bit of a public relations problem.

U.K. Treasury officials last year told Parliament that its £270 million (around $368 million U.S.) Real Time Information, or RTI, program upgrade would “bring PAYE into the 21st century” and make it more accurate for both employers and HMRC.

Maybe that will happen with version 2.0.

So far, though, HMRC’s estimated 5.5 million errors for 2013-14 are higher than the 5.2 million it encountered the previous year.

A spokesman told the newspaper that RTI’s effects had not been reflected yet and predicted that the system would eventually lead to a reduction in the number of needed corrections.

But, added HMRC, some adjustments would always be a feature of the tax system.

Apparently, some things are the same regardless of which side of the pond taxes are collected.

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TO WRAP UP 2026

It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

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