HMRC to manually review 107,000 tax calculations

HMRC have received complaints over a technical system error that may have left taxpayers overpaying.  As a result, HMRC will be manually reviewing 107,000 tax calculations from 2025/26.

HMRC has admitted that a glitch in the system can allocate income and the savings allowances the wrong way around resulting in more tax being due.  The system should allocate income and savings allowances using the most beneficial ordering under Section 25(2) Income Tax Act 2007.  This glitch was first identified in 2021 but has not been resolved and requires manual checks to correct the effected calculations.

April 2027 Tax Rule Changes

HMRC expects changes to the tax rules that are due to come into effect in April 2027 will reduce those calculations that require manual checks to around 20,000.

HMRC are still checking those flagged for review so it is not clear how many checks will result in corrections, furthermore the check only covers those flagged for review, so there could be some incorrect calculations outside those flagged that could remain wrong unless taxpayers spot the error themselves.

Could you be affected by this?

Those taxpayers with income from more than one source are more likely to be affected.  For example:

• You receive employment or pension income as well as savings income (savings or dividend) above your personal allowance.
• You have property, savings or dividend income as well as employment or pension income.
• Your income sources have changed significantly between 24/25 and 25/26.

If you think you are affected, you should check how HMRC have applied your personal and any savings or dividend allowances – the order should be applied that produces the greatest reduction in your tax liability.  If in doubt contact HMRC directly or speak to a professional.

Please contact us if you need any further information.