By checking PAYE coding notices Britain’s taxpayers can make sure that they are paying the right amount of tax. Many taxpayers do not know they may be paying more tax than they should. Others may not be paying as much as they should and may not realise that they have a responsibility to let HMRC know.
Taxpayers should check their Pay As You Earn (PAYE) coding notice from HM Revenue & Customs (HMRC).
John Cullinane, President of The Chartered Institute of Taxation (CIOT), says: “Those taxpayers who complete a self-assessment tax form are given an explicit opportunity to state how much tax they should pay. For everyone else the PAYE code is effectively their tax return - yet most UK taxpayers assume the PAYE code and coding notices are correct. This is like signing your tax return without reading it.”
The CIOT recommends that all PAYE taxpayers check their PAYE code and coding notices they receive against their own income and reliefs that may be available. There is information on the HMRC website about income that must be reported and reliefs that may be claimed. PAYE taxpayers should keep records of their income, the tax they have paid and check any communication HMRC send them.
In recent research undertaken on behalf of the CIOT, 47% of UK taxpayers polled said they never checked to see if their PAYE code is correct. 42% said they found it ‘very’ or ‘fairly’ difficult to understand if they are paying the right amount of tax.
John Cullinane adds: “The majority of people in the UK have most of their tax collected through PAYE. A December 2006 National Audit Office report indicated that HMRC estimated that last year taxpayers may have overpaid around £500 million via PAYE, and that £1 billion of tax may have been underpaid. They estimate that 5.7 million taxpayers may not be paying the right amount of tax. This is why the CIOT is bringing the issue to the public’s attention now. We agree with HMRC that it is vital for people to keep their tax records and also urge them to make sure they understand their tax code.”
For anyone struggling with their PAYE code, the CIOT recommends they first contact their local Tax Office. You should be able to find their number in the Yellow Pages.
John Cullinane suggests that: “If you need more help you should consider using a Chartered Tax Adviser (CTA) for advice. If you cannot afford to pay for the advice that you need the CIOT suggests you contact TaxAid, or in the case of older taxpayers, TaxHelp for Older People (TOP).”
John Cullinane continues: “The majority of taxpayers in Britain are in the PAYE system. Unlike companies or people who are self-employed they are not in the front line of dealing with the tax system, yet many now realise the system has become unwieldy.”
We understand that PAYE coding checking and advice is by far the biggest area of problems in which TOP are called in. 42% of calls to TOP in 2006/07 were on coding problems alone.
The CIOT continues to work with HMRC to improve the workings of the system but there are limits to what can be achieved when the tax rules HMRC have to work with are themselves too complicated. The Institute also continues to make the case for simplification in order to make the tax system work better. Unfortunately, neither is a substitute for people checking their own records – although this would be made easier if the system were simpler.
Robin Williamson, Technical Director of the CIOT’s Low Incomes Tax Reform Group (LITRG), comments: “The work we do with people on low incomes highlights how difficult the tax system can be. People have a right to be able to understand what they are paying in tax. LITRG campaigns to ensure that the system does not disadvantage the unrepresented.”
The research was carried out on behalf of the CIOT by CommunicateResearch.
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Notes to Editors
The poll also showed that 74% of those questioned pay their taxes through their employer and 89% of people who were polled thought that the tax system should be simplified.
CommunicateResearch interviewed a random sample of 1,000 income tax payers throughout Britain online from 23 February to 1 March 2007. The sample was drawn from a nationally representative sample of British adults for which quotas were set by age, gender, region and social grade.
Contact details for HMRC offices can be found at www.hmrc.gov.uk/local/individuals/index.htm
TaxAid is an independent, free tax advice service for people who cannot afford to pay a professional adviser. They can be contacted on their helpline 0845 120 3779 (open Monday - Thursday 10am to 12pm), or at email@example.com
TaxHelp for Older People (TOP) is an independent, free tax advice service for older people on low incomes who cannot afford to pay for professional advice. They can be contacted on their helpline 0845 601 3321, or at TaxHelp for Older People, Pineapple Business Park, Salway Ash, Bridport, Dorset, DT6 5DB.