Tax payers who struggle to repay underpaid income tax will not be charged interest after the UK’s top tax man admitted that HMRC “could have done better” to prepare people for demands of millions of pounds of back-tax.

Around 2.3million tax payers are believed to have underpaid tax under the pay-as-you-earn (PAYE) system, although around 900,000 that owe less than £300 will have their debts written off.

That leaves around 1.4 million people owing about £2bn, or £1,428 each on average and Permanent Secretary for Tax Dave Hartnett admitted that the tax authorities could have handled the problem better.

HMRC has confirmed that those who need extra time to pay back-tax of more than £2,000 will not be charged interest.

Appearing before the MPs on the Treasury Committee with Dame Lesley Strathie, HMRC chief executive, and Bernadette Kenny, director general of personal tax, Dame Lesley said that she had “empathy” for those facing underpayments and wished to make it as easy as possible for them to pay.

“Where people need time to pay, they will not be charged interest,” she said.

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