Tax error post arriving across UK

HMRC coding notice HMRC will demand immediate payment from those owing more than £2,000

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Thousands of letters informing people that they have paid too little or too much tax for the last two years are due to arrive at addresses across the UK.

Between now and Christmas, about 5.7m people will learn whether they will get a rebate or face having to pay money back following errors by tax officials.

Some 1.4m people have had an average of £1,428 too little tax deducted by Her Majesty's Revenue and Customs.

The first letters were sent out a few weeks ago as part of an initial pilot.

Now HMRC is stepping up its efforts to resolve the situation by sending out hundreds of thousands of letters every week between now and December.

Of the 5.7m targeted, 4.3m people have overpaid tax in the past two years by an average of £400.

Of those who underpaid, people owing less than £2,000 will be able to pay the money in monthly instalments taken from their salary over one to three years.

But those who owe more than £2,000 will be told to pay up now, or to discuss options to spread the load.

It is estimated 2.3 million people underpaid income tax during the past two tax years because of errors in their Pay As You Earn (PAYE) tax code.

The mistakes were made because of miscalculations made by HMRC tax officials, and a new computer system introduced by HMRC in 2009 allowed more discrepancies to be identified.

About 900,000 taxpayers will not have to pay anything after the government raised the write-off threshold from £50 to £300.

Details of the tax errors first emerged in September when Treasury minister David Gauke said that in the current financial climate, the government was not in a position to "just wave goodbye" to the money owed.

He said the government had inherited the problem and the PAYE system, which was created in the 1940s, was struggling to cope with modern working patterns.

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