A whopping 1.4 million taxpayers will be asked to pay an average £1,400 back because they've been charged too little tax after an HM Revenue & Customs (HMRC) blunder.
The chaos means 5.7 million taxpayers could have been paying the wrong amount during the 2008/09 and 2009/10 tax years. Some 4.3 million have overpaid and are due cash back, while the rest have underpaid (see the 2010/11 Tax Breakdown guide).
HMRC says where it has not followed its own rules it will write-off money owed if the taxpayer complains through the appropriate channels.
So what must you do if you owe tax and how can you avoid paying?
What's happening now?
HMRC is set to send out letters, called P800 tax calculations, to affected taxpayers between now and Christmas informing them whether they owe or are owed cash, and how much.
The first 45,000 P800s would have landed on doorsteps today.
Who is affected?
The blunder only affects those who pay tax via the Pay As You Earn (PAYE) system where money is deducted by an employer.
Within that group, those with complicated affairs are most likely to have been given the wrong tax code by HMRC, meaning the wrong amount of tax was deducted.
This is most likely to affect anyone with more than one job or pension, anyone who has changed job or those who receive benefits via their employer such as health insurance or a company car.
I've been asked to pay money back. Must I pay it all?
Not necessarily. Accountants say there is a little-known clause dug deep in the HMRC rule-book, called the 'Extra Statutory Concession (ESC) A19', which states the Revenue must give up any tax if it has not followed its procedures correctly.
An HMRC spokesman says the Revenue will not fight any genuine claims, adding: "People are fully entitled to this concession and we feel an obligation to them so we won't fight it."
The upshot of the ESC A19 rules is that, say, HMRC miscalculated tax for the 2008/09 tax year, which ended in April 2009, you may now be able to escape paying any underpayments for that year.
Under the rules, HMRC won't collect tax if it has failed to properly use information supplied by a taxpayer, their employer or the Department for Work and Pensions if the taxpayer is notified of the underpayment over 12 months after the end of the tax year in which the Revenue received the information.
In the example, the ESC A19 clause may be cited now as the 12-month cut-off was in April 2010.
In exceptional circumstances, underpaid tax notified less than 12 months after the end of the tax year may be waived if the Revenue failed more than once to make proper use of the information or allowed the arrears to build up over two successive tax years.
If you want to complain, raise this with your tax office but it will only work if HMRC received the correct information.
I've decided/have to pay tax back. What are my options?
If you owe under £2,000 you can pay this in monthly installments via PAYE during the 2011/12 year, which begins next April.
If you owe £2,000 or more there are two options. You can pay it as a lump sum, though HMRC has yet to set a date by when this must be paid.
Alternatively, you can clear as much as necessary so you owe less than £2,000, which can then be collected via your 2011/12 PAYE tax code.
What if I can't afford to pay my tax back?
HMRC says it may be able to spread payments over a longer period but it stresses it is not making any promises and will treat each case based on individual circumstances.
Accountants also say where paying the tax would cause hardship and the taxpayer has a very low income and no assets, HMRC should temporarily write it off.
But it could ask for it back if the taxpayer's fortunes improve.
Who do I contact about an underpayment?
Speak to you tax office (which may not be your local tax office). The number should appear on your tax underpayment notification.
I'm owed money. What happens next?
If your letter states you overpaid tax you will get a cheque within seven to ten working days of that letter arriving so there is no need to act.
The average rebate will be around £420. You will also get nominal interest at 0.5%.
Of course, make sure the figures on your paperwork are accurate. If inaccurate or your cheque does not arrive in time, contact your tax office. The number should appear on your tax rebate confirmation.
Martin Lewis, MoneySavingExpert.com creator, says: "The real problem is the tax code system is ridiculously over-complicated.
"You could have the right tax code from your employer under PAYE and the right tax code from a pension provider under PAYE but the two in combination could be wrong.
"And there's no simple way of finding this out so this fails the nonsense test. In other words, if you got your code and it was nonsense most wouldn't be able to tell.
"It's not simply the fact there has been a glitch, it's that most would not have been able to spot it earlier."
We will provide a full guide to ensuring you're on the right tax code in the coming weeks. Please suggest any tips you've got to helping others ensure they're on the correct code in the discussion link below.
Further reading/Key links