UHY warns one in three PAYE codes incorrect

As many as one in three taxpayers could be in danger of paying the wrong amount of tax due to HMRC issuing incorrect PAYE codes, according to research by UHY Hacker Young, reports accountancy services Harris & Co.

Analysis of tax codes sent to the firm’s clients has revealed that around 37% would have resulted in people paying the incorrect amount of tax, which UHY says is a particular concern as most taxpayers do not check their code.

Roy Maugham, tax partner, said: ‘Mistakes most frequently occur when someone has several sources of income, for example income from an investment as well as a salary and benefits from their employer, or where they have received a large one-off sum such as a dividend payment.’

Many of the mistakes involved are quite basic, according to the research, which says that this year one of its local offices saw errors for 20 different taxpayers in just one week relating to employee benefits listed on a P11D form, mostly involving failure to account for the tax due on benefits in kind.

Maugham said: ‘Benefits and expenses like company cars and private health cover are part of standard packages for millions of private sector employees. Their tax affairs are not necessarily very complex, and in most cases they won’t use an accountant to check whether they are paying the correct amount. Underpaying tax is more of a problem than people realise as it can be a shock to an individual’s cashflow when HMRC moves to claw it back.’