An estimated six million taxpayers are in line for a windfall refund as Revenue & Customs tries to unravel the latest in a series of administrative problems.
The taxman is repaying almost £2.5bn in overcharged tax and interest to clear a backlog of errors that goes back to 2003, according to the Daily Mail.
Taxpayers will on average receive a repayment of overcharged tax of £300 plus interest of up to 4%.
The first refund letters will be sent out later this month, but the whole process will run for more than 12 months, with final payments not made until December 2012.
Matt Coward, a partner at accountant Price Bailey in the City of London, says: ‘There is no easy way for people to tell whether they can expect a letter or not. It will come out of the blue to many."
The refunds affect some of the 40 million taxpayers who deal with Revenue & Customs only through the Pay As You Earn (PAYE) tax system.
This relies on employers and pension companies reporting details of income paid each year, which the taxman then uses to calculate an annual tax code for each person.
However, if someone changes jobs midway through a year, or has two or more sources of income, errors can creep in as one employer may end up collecting too much or too little cash.
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