Workers in Wales are being told to crosscheck their payslips over concerns a number of employers have put staff on the wrong income tax rate.
Thousands of the country’s 1.5 million workers may have overpaid on tax, due to an error on their employer’s paperwork.
HMRC told the Mirror the issue is linked to firms wrongly applying the Scottish tax code to people’s income tax – which can be a higher rate than the new Welsh one.
It denied any wrongdoing and insisted the error is the fault of those employers who failed to use the right code.
New Welsh Rates of Income Tax (WRIT) were introduced in April 2019. Taxpayers were assigned a C prefix in their tax code denoting where they live (this can be found on your payslip).
However, the tax authority said some firms have been applying an S prefix, so some people have paid Scottish rates .
As a result, HMRC owes people in Wales money – see below on how to check if you’re affected.
The Chair of the National Assembly’s Finance Committee, Llyr Gruffydd AM, said: “HMRC’s admission is deeply disappointing as this Committee was repeatedly given assurances that mistakes like this would not happen.
“We raised concerns about the flagging process for identifying Welsh taxpayers during our inquiries into fiscal devolution and the Welsh Government’s draft budget.
“On each occasion we were told the matter was in hand and the lessons from the devolution of income tax powers to Scotland, where there were similar issues, had been soundly learned and would be put into effect.
“We are seeking an immediate explanation of how this has happened and will be asking representatives from HMRC to appear before this Committee in the near future.”
The easiest way to check if you have overpaid is to take a look at a previous pay slip. On this, you should find your “tax code” starts with the letter ‘C’ if you are meant to pay Welsh rates.
Anyone that finds an ‘S’ may find they’ve been put on the Scottish rate of income tax, which is higher for anyone earning more than £26,995.
The good news is if you have overpaid, you don’t have to take action as HMRC is already in the process of rectifying the problem.
It said refunds will be automatic – and should show up on your next payslip.
A HMRC spokesman told Mirror Money: “We have been made aware of an error in the application of new income tax codes for Welsh taxpayers by some employers which has meant some taxpayers payed the incorrect amount of tax in April.
“It is the responsibility of the employer to apply the tax codes provided by HMRC and we are working closely with the employers affected and providing support as they investigate and correct the problem.”
Who’s at risk of overpaying?
While anyone who pays income tax could potentially be on the wrong code, the recent problems have come from the introduction of new rates in for Wales in April 2019.
That’s because if your main residence is in Wales, and you pay income tax, you will have been moved to the new system.
It’s important to point out this is about where you live, not where you work, so it doesn’t matter which side of the border you work on.
You only pay the Welsh rates if you live in Wales for longer than anywhere else in the UK over a tax year (6 April to 5 April the following year).
The new rates will be backdated to the start of the tax year in which you moved, if you move to the Wales.
If you have a home in Wales and one elsewhere in the UK, you need to let HMRC know which is your main residence .
How will I know it’s been noticed?
HMRC said its PAYE P800 tax calculation system means you do not need to claim a repayment as it will be issued automatically.
However, if you have not received a P800 tax calculation from HMRC, and you have overpaid tax, you may need to make a claim for a tax repayment.
You can get in touch with HMRC using any of the details here .
Before calling you will need:
Your personal details such as your full name, address, date of birth and National Insurance number.
Details of each of your employers or pension providers and their PAYE scheme reference number.
Estimates of your earnings and pensions from each source for the current tax year.
How tax rates compare in Wales and Scotland
Scottish tax bands:
- Personal allowance – Up to £12,500 – 0%
- Starter rate – Over £12,500-£14,549 – 19%
- Scottish basic rate – Over £14,549-£24,944 – 20%
- Intermediate rate – Over £24,944-£43,430 – 21%
- Higher rate – Over £43,430-£150,000 – 41%
- Top rate – Above £150,000 – 46%
Welsh tax bands:
- Personal allowance – Up to £12,500 – 0%
- Basic rate – £12,501 to £50,000 – 20%
- Higher rate – £50,001 to £150,000 – 40%
- Additional rate – over £150,000 – 45%