Tips to beat the taxman
There are still a number of ways you can reduce your tax bill.
Giving a helping hand
Introducing the concept of saving at an early age is no bad thing. But what are the tax implications...
Cracking the tax code
What effect do these numbers and letters really have on the amount of tax we pay?
Current rating: 3/5
Computer says no
According to recent news reports some of us could have been paying the wrong amount of tax because our tax code is incorrect. Some of us have underpaid (sad face); some of us have overpaid (happy face!).
Contrary to many reports most of us have in fact been paying the right amount of tax. You’re more likely to be affected if you are receiving income from more than one source or if you have switched jobs within the last few years. If you are affected than you should receive a letter shortly from H M Revenue & Customs (HMRC) which will include a tax calculation that you should check.
Apparently, there is a backlog of cases which could take up to four years to clear. Letters relating to errors made in the 2008/09 and 2009/10 tax year should be issued by Christmas, with the remaining cases being dealt with early next year.
If you have overpaid some tax, then HMRC will refund your money by cheque - although there is no word on when these refunds will actually be made. The average amount being refunded is £400 - a nice little bonus in the lead up to Christmas.
If you have underpaid then things are not so good. It has been reported that the average amount of underpayment is £1,400. In this instance your tax code for next year will be adjusted so HMRC can reclaim the owed money gradually over the 2011-12 tax year. So don’t panic, you won’t be expected to pay the money you owe in one go and if you can prove that you are genuinely suffering hardship HMRC will allow payments to be spread across three years.
If you owe more than £2,000 then HMRC will discuss with you how to repay the money.
We understand that debts of £300 will be written off. If you owe more than this and your tax affairs are in order you can contact HMRC and ask them to review your case.
How did it come to this?
HMRC introduced a new National Insurance and PAYE computer system at the beginning of this year, which highlighted concerns about how the previous system worked. A subsequent investigation by the Treasury confirmed what some had suspected for a long time that errors had previously been made. As a result a complete overhaul of the entire system is now being considered.
The new computer system in the future will match up taxpayer’s records automatically, so the number of errors made going forward should be much less, however that is little consolation for those of us that will be receiving some unwanted news over the next few weeks to digest with our cornflakes.
Beware fraudsters
This situation presents an ideal opportunity for fraudsters to do some online scamming. So keep your wits about you!
Source: Time For Money