Errors in the HMRC tax calculation 2016/17

Problem.

Unfortunately, due to the complication of the tax calculation for 2016/17 HMRC have made a number of errors. You may therefore be asked to pay an incorrect amount of tax if you have used the HMRC software. Further, all commercial software must be validated by HMRC, so these errors will occur here as well.

What can you do?

Picking up the errors will be difficult. If you do, you can file a paper Return and the deadline has been extended to 31 January 2018 where this issue arises. For those who have or will file online hopefully your tax calculation will be corrected automatically once the software has been updated. I would keep an eye on this.

Examples.

Circumstances. You are allowed to allocate your Personal Allowances (PA) in the most tax efficient way. Where your dividend income is in excess of the £5,000 savings band HMRC may allocate part of your PA against the excess. Dividends however are only chargeable at 7.5% if you’re a basic rate taxpayer whereas you other income is chargeable at 20%.

Circumstances. If your non-savings income pushes you over the basic rate threshold by £5,000 or less HMRC are not giving the part savings rate band you are entitled to.

Circumstances. You have a Chargeable Event Gain (CGE) on which top slicing relief is due and the CGE causes a restriction to your personal allowances. Colleagues have questioned why this restriction should apply and HMRC are considering this.

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