HMRC Yet to Streamline the New 50p Income Tax Rate
HM Revenue & Customs has conceded that its existing system is unable to cope with the new income tax rate of 50p for those high earners who have more than one job. The deficiency lies with the PAYE system.
HMRC fell short of issuing new PAYE code to some of those concerned, when the new rate came into vogue in April, 2010. This resulted in slamming demand for unpaid tax to thousands of affected persons like company directors, solicitors, hospital consultants and dentists. High end earners with more than one job with combined earning over £150,000 threshold were the most affected by this error. Till now, such category was paying only 40% tax on earning beyond £150,000 through the PAYE system.
HMRC intends to recover such unpaid tax after they submit their duly completed self assessment forms by January 2012. The lacuna is that those persons who are at the verge of retirement may be slammed with large tax bills which they have to drain out from their pensions.
HMRC bulletin posted on website only this month informed that HMRC do not have appropriate 50% tax code which they could apply to persons with multiple employments. Such persons having multiple source of income generation may not be paying accurate tax as when their multiple income is combined together and they become liable to pay the tax at 50%.
As per the new 50p tax code, at least 300,000 people may get into 50p rate net. HMRC are still in the dark about number of persons who have been given the incorrect code. An HMRC spokesman said they do not have information about number of persons falling within 50% rate band but it would be only a small percentage of total PAYE customers.