Tax Rebate Letters On Their Way

Tax rebate letters will be going out from 17 May, two months earlier than in previous years.

Over the next few weeks, about 3.5 million taxpayers will receive a tax rebate for the 2011-12 tax year, averaging £379 each.

However another 1.6 million people will be told they have underpaid and now have to pay on average £537 each.

HMRC said the letters were due to its annual reconciliation of PAYE tax codes against final earnings and tax payments.

This is the third year of large scale income tax adjustments. The introduction of a new PAYE computer system in 2010 caused controversy when it revealed the need for extra tax adjustments going back as far as 2004-5.

Last year, the normal reconciliation exercise saw nearly five million people being told they had either overpaid or underpaid tax in 2010-11.

This year, HMRC says that the main reason for people having to pay additional tax, or receiving a tax refund, was that their circumstances had changed during the course of the year.

Examples include:

• Receiving more benefits-in-kind from employers
• Having more than one job or a pension, with the personal allowance split between income sources
• Moving jobs with gaps in between

HMRC said that taxpayers did not need to take any action, as most people who owed money would have the repayments taken from their earnings in the next tax year via an adjusted tax code.

The last letters will be sent in October this year.

If you have questions about your tax code and the income tax you pay, why not use our Ask The Expert service? Or you can download our free guide on Understanding Your Tax Code.

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