Taxman’s bungle classes 30,000 Scots as English – and some face higher bills

AT LEAST 30,000 Scots have been wrongly classified by the taxman as living in England, leading to some facing higher tax bills.

The blunder was discovered as taxpayers rushed to file selfassessment forms before the deadline of January 31.

Several professional accountancy bodies have contacted HMRC, worried by inconsistencies in clients’ residency details.

But the error is also affecting those who pay tax via their employer under the PAYE system. Scottish accountancy bodies say they have met the Scottish Government to discuss the error, leading to each higher-rate taxpayer incorrectly labelled paying around £400 less in tax overall in 2017/18, with all revenue going to Westminster rather than Holyrood coffers. At one large Scottish local authority, one in five workers is believed to have been wrongly designated as English. Scotland’s largest independent accountancy chain, Johnston Carmichael, said more than 100 of its higher ratepaying clients had received letters from the tax office with recalculations of their tax based on them living south of the Border.

A spokesman said: ‘Up until a few months ago they were properly classified as Scottish taxpayers according to their PAYE code – so we have no idea why it has changed on their self-assessment calculation.’

About 3.5 million people have yet to file their returns, out of 11.5 million in the UK overall.

HMRC have confirmed around 30,000 people have had the issue corrected and say that because the Scottish rates were the same as the rest of the UK for 2017/18, for most basic rate taxpayers, residency status had no effect on their tax bill.

It is understood that where the right tax code has not been applied, HMRC will be able to recoup the money in the next financial year through its ‘reconciliation process’.

Scotland chose from April 6, 2017, to freeze the threshold at which people started paying 40 per cent income tax, while the rest of the UK did not.

In Scotland, the higher rate tax of 40 per cent continues to apply at £43,001, but in England, Wales and Northern Ireland it is £45,000.

An HMRC spokeswoman said yesterday: ‘We have robust systems in place to identify Scottish taxpayers and ensure they pay tax at the correct rates.

‘If someone disagrees with the residency status on their tax calculation they should check that the address is correct and let us know if it isn’t.’