Millions of UK tax payers to pay more after being taxed less

Millions of people in the UK would be forced to hand money to the government after paying the wrong amount of tax due to miscalculation of their bills, Sky News reported.

The HM Revenue and Customs (HMRC)'s blunder relates to the Pay As You Earn system (PAYE) last year.

Thanks to errors in the scheme, around 3.5 million people ended up paying too little tax and would now need to pay the money over the coming years.

A further 2 million paid too much and would be eligible to refunds by the end of the tax year, next April.

The estimated average mistake for individuals was around £300 and while errors are reported every year, the number of errors in 2013-14 was much higher than on the previous year with 5.5 million people affected as against 5.2 million the year before.

A £270-million scheme to improve the tax system was introduced last year.

Under the HMRC's new Real Time Information (RTI) programme employers are able to report wage changes on a weekly or monthly basis.

Defending the current system, a spokesman for HMRC said, most people paid the right tax throughout the year, but there would always be a small percentage of the 41 million people in in PAYE who had underpayments or overpayments at year end.

He added, the effect of Real Time Information was not reflected yet as it had not bedded in but, over time, RTI would help to reduce the number of cases that had to be reconciled.

The average underpayment or overpayment amount was £300, according to the HMRC, The Guardian reported.

According to accountants, the increase in errors suggested the system struggled to cope with modern employment patterns.

The report  quoted Susan Spash, partner at leading London chartered accountants firm Blick Rothernberg,  as saying the system did not cope well with people with more than one source of income, such as those who were still receiving pension income but had found another job.