HMRC is issuing incorrect tax bills for savings interest, including amounts that are tax-free in ISAs, leaving many savers facing unexpected charges. One saver was wrongly billed £3,847 when their actual untaxed interest was just £94.
Widespread Errors in Tax Calculations
Financial advisers report that HMRC has been using flawed estimates, duplicating interest figures, and even taxing interest held in ISAs, which should be shielded from tax. These errors have led to demands for ministers to intervene.
Richard Fuller, shadow chief secretary to the Treasury, said: “At a time when many are struggling with Labour’s tax hikes and the cost of living, we are learning that HMRC has been taking money it shouldn’t and putting people’s finances under further strain. Ministers should act to bring HMRC into line and stop these unnecessary and unfair charges.”
Impact on Savers
Sir Iain Duncan Smith, former Conservative leader, criticized HMRC: “HMRC is a department that has been a law unto itself for far too long. Their failings have been huge, their oversteps in terms of poking into people’s private affairs is also enormous, and their failings have also left the taxpayer picking up the bill.”
Sarah Weston of the Low Incomes Tax Reform Group said: “We are aware that some taxpayers have received tax calculations and tax coding notices showing savings interest figures they believe to be inaccurate, which can lead to unexpected tax bills or PAYE deductions. There do appear to be some instances where the figures used by HMRC do not match with the taxpayer’s own records.”
HMRC Response
An HMRC spokesperson said: “We don’t want anyone to overpay or underpay tax. We update tax codes based on the most recent data available from financial institutions, ensuring we get information from them as close to real time as possible going forwards. We continuously improve our processes to allow payments to be corrected. Anyone who thinks the information we have is incorrect should let us know straight away so we can put things right.”
