HMRC has changed workers' tax codes based on flawed projections for savings interest, leading to unexpected bills of up to £500 a month for some UK households. The tax authority is being accused of wrongly charging savers thousands of pounds for tax they do not actually owe.
Case Study: £500 Monthly Charge
One saver, who spoke to The Telegraph, reported being hit with a £500 monthly tax charge after HMRC incorrectly estimated the tax owed on his savings interest. He said: "With a mortgage and children, it's quite a big chunk of money to have just randomly taken out of your paycheque with no warning letter." He added that the tax arm of the Labour Party government explained they had "speculatively charged me based on a larger amount of money in my account the previous year," calling it "completely out of order."
HMRC's Response
Although HMRC stated that it had "applied the correct rules" in his case, the taxpayer is one of many victims of flawed tax calculations. The Conservative Party has urged ministers to bring HMRC "into line" to prevent further "unnecessary and unfair charges."
Another Victim: Inherited Money
A second taxpayer described her ordeal: "My mum passed away two years ago so I inherited a bit of money after we sold the house. But I've spent some of the money and put more of it into Isas since then. I don't know where they're getting their figures from and I don't know how to challenge them." HMRC claimed her savings interest would total £6,502 this year, but the pensioner estimated the true figure to be closer to £2,000.
Expert Opinion
Antonia Stokes of the Low Incomes Tax Reform Group said data mismatches were "inevitable," adding: "We have heard of this happening. As such, we feel strongly that HMRC should put processes in place so that taxpayers can challenge data they believe to be incorrect, without the need to suffer the time and inconvenience of gathering their own proof."
HMRC Statement
An HMRC spokesman said: "We applied the correct rules for taxing savings interest for Andrew and Mr Price and we've apologised to Julia having corrected her tax calculation. We don't want anyone to overpay or underpay tax, so we update tax codes based on the most recent data available and work with financial institutions to get info."
