Personal tax calculations error

8th May 2017

Software programmers have for some time struggled to cope with the complex UK tax system and recent changes to the taxation of dividends and savings income has resulted in errors occurring in HMRC’s own software. This has ultimately impacted third party software providers who have to follow HMRC specifications, even if these have inbuilt errors!

These computation issues will impact a number of taxpayers and HMRC have included details of the taxpayers who are potentially affected in their list of exclusions for online filing (https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/601946/2017-exc-indi.pdf)

Note those affected, are also required to submit their Returns on paper rather than electronically. This will extend the time taken for HMRC to process these Returns.

The two main scenarios that will impact our clients are as follows: 

  1. Non-savings income of between £11,000 and £16,000 with total income of more than £32,000; HMRC tax computation software will not apply the zero percent savings starting rate of £5,000 to savings income, which could result in additional incorrect tax calculated of £1,000. 

  2. Annual income of more than £145,000 and non-dividend income of between £27,000 and £32,000; HMRC tax computation software wrongly allocates the £5,000 dividend tax allowance, resulting in incorrect additional tax calculated of £280.

Fortunately for ABG’s clients, the news is not all bad. ABG’s personal tax team have ensured we have systems and software in place to advise our clients of their correct tax positions.

HMRC have also advised they do not expect to provide a fix until the 2017-18 tax year, so in the meantime we will have to resort to traditional paper filing methods for those affected.

If you wish to talk to our team to discuss how this issue many have impacted upon your tax affairs please contact us on 020 7330 0000.