There has been fear across the country this week as the news broke that six million taxpayers across the UK have underpaid tax thanks to an HMRC PAYE error. It is expected that those affected will have to pay HMRC between £1400 and £5000 over a specified time period.

The first letters arrived on doorsteps on Tuesday and, while these were not demands for payment, they have opened up that dialogue between the taxpayer and HMRC who will be looking to recoup al lost taxes even though the taxpayer is unlikely to have been at fault.

In actual fact, the fault lies with the new PAYE computer system which has been responsible for a total of £2 billion in underpaid taxes. Of course, there is a silver lining though. It is believed that there are around 4 million British taxpayers who will be in for a pleasant surprise when they receive a letter stating that they have overpaid their taxes.

Everyone from accountants to HMRC have been commenting on this blunder over the past week but things have now taken another turn. Seemingly bowing to pressure from the public, it has been announced that around 1 million taxpayers who have underpaid will actually have this debt written off. This applies to debts up to £300. Others who owe more than £300 will have the ability to pay back the underpayment over a period of up to three years. There is a catch, however, since the debt will accrue a 3% interest rate over this period.

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