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1.2 million owe tax after HMRC error

Many of those affected have recently retired and started drawing a pension for the first time. They may have to repay more than £1,000.

Another 3.5million could get rebates from HM Revenue and Customs because of the Pay As You Earn (PAYE) system.

The repayments are the result of an annual examination of PAYE records, which has disclosed that almost five million people paid the wrong amount of tax in 2010-11.

An internal revenue audit has disclosed that about 1.2million people paid an average of £600 less tax than they should have done in the tax year that ended in April. Most will have £50 a month deducted from next year’s pay packets to make good the shortfall.

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