New Tax Bomb – 2 Million UK Residents Underpaid Their Taxes

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The taxman cometh for nearly 2 million people that did not pay the correct amount of tax via the PAYE system. The PAYE system has been in the news repeatedly due to tax errors, but HMRC announced that nearly two million people did not pay the right amount of tax. Once identified, this is an error that will have to be corrected immediately. Being in trouble with the HMRC is not a good thing. It will eventually come out of your wages, or they can place liens on your property until the debt has been paid. Unlikely some debts, back taxes owed to HRMC are not discharged in bankruptcy unless there is a documented hardship.

So what do you really need to do, at this point? The answer is simple: wait.

You see, HMRC has to send you a letter to indicate whether or not you’ve been overpaying or underpaying. If you’ve underpaid, then you may be able to just handle your reconciliation through your normal pay. However, if you’ve underpaid by more than three thousand pounds, you’ll have to pay some of the bill now to get it under the 3,000 mark. Once you do that, you can set up payment arrangements throughout the 2014/15 tax year, just like the first group.

What happens when you absolutely have no way of paying anything. You will need to make sure that you’re taking action now and not later to get things done. You will want to contact HMRC by mail so that you have a record of the conversations, and let them know exactly what you can do. Don’t try to talk about a large amount if you’re not going to be able to actually do anything near that amount. Settle for getting things done slowly but consistently. It’s better to show that you can pay a certain amount faithfully than to name a big number that you’re just not going to be able to reach.

HMRC has a tax checker to help you determine if you’re owed money through a tax refund. You also will get a cheque sent to you for the amount, which can be a nice surprise. Why not jumpstart that ISA account, if you haven’t already? Or you can use your tax refund to pay on some bills. It’s completely up to you.

Now is the perfect time to get your taxes in order for next year by following a proper recordkeeping system. Good luck, and make sure that you stay on top of your taxes!