HMRC Claim too much tax through HMRC Assessment Errors

Divingnorway

Check your annual tax charge!
The error below were picked up when I completed my Self assessment Return for 2023/24. They could be included in tax charges claimed from people who do not complete Self Assessments, and therefore get by without being detected and challenged.

A claim for underpayment of tax in 2022/23 suddenly appeared on my Self Assessment Return for 2023/24. All of the tax statements that I had previously had from HMRC stated that no tax was owing for previous years. I challenged HMRC to explain why this claim had suddenly arisen. I was told it was their error, and the claim would be cancelled.

eskbanker

Divingnorway said:

Error 2 by HMRC / DWP:
If you are in receipt of a State Pension, the amount included in your tax return is supplied by DWP. This represents your annual entitlement, and not what it should be for tax, which is what you have actually received. 

Income tax on state pensions is based on entitlement not receipt....

badmemory

I thought it was based on when you accrue the payment of state pension.  If you defer payment then it is not yet taxable.  Most tax years are 1 week at the old rate & 51 weeks at the new rate.  HMRC are given the figure by DWP & then work on 52 weeks which is not correct.  You can check the first payment WEEK of the year by the letter they send telling you what the new rate is.  Unless you need to do self assessment for another reason then they will push you onto simple assessment.  The figures for which need checking carefully.  They put me on simple assessment as soon as it started.  Looking forward to the time it is correct.

Unfortunately I now need to ring HMRC as my simple assessment is still not here, so 4 months late & according to the dedicated line my account shows nothing.  No state pension, no private pension & no savings interest.  And as for the government gateway, I used to have an account when I filed SA which of course I haven't used for some years so I can't access that because it has been deleted & I can't open a new one because I already have one.  Catch22.

Then people wonder why HMRC lines are so busy!

eskbanker

badmemory said:

I thought it was based on when you accrue the payment of state pension.  If you defer payment then it is not yet taxable.

Agreed, I wasn't meaning 'entitlement' in that sense, but just that the tax liability (for those already claiming) isn't based on how much actually landed in your account between 6 April one year and 5 April the next, but on the entitlement over that period - it's only ever a very minor discrepancy, which should balance out over time.

kelsbrobonny

I have finally received my HMRC tax calculation for 2023/24 and found that interest on an ISA has been taxed.  I followed Martin Lewis's advice, did the online calculation and asked the building society to switch my low interest ISA to their higher interest ISA (with a small penalty, but still more than worth it).  I did not remove the funds - it was just an internal switch, which they competed and documented for me.  Not sure why the full interest has now been taxed.  I contacted HMRC and after lengthy (16 page) online discussion, they have agreed to refer this on to the powers that be to see if this tax can be refunded. Has anyone had similar problems?

eskbanker

kelsbrobonny said:

I have finally received my HMRC tax calculation for 2023/24 and found that interest on an ISA has been taxed.  I followed Martin Lewis's advice, did the online calculation and asked the building society to switch my low interest ISA to their higher interest ISA (with a small penalty, but still more than worth it).  I did not remove the funds - it was just an internal switch, which they competed and documented for me.  Not sure why the full interest has now been taxed.  I contacted HMRC and after lengthy (16 page) online discussion, they have agreed to refer this on to the powers that be to see if this tax can be refunded. Has anyone had similar problems?

HMRC are 'the powers that be' when it comes to taxation!  Without sight of the detailed discussion, it's impossible to see where the issue has arisen, i.e. whether your ISA provider has erred or if it's an HMRC error, but it sounds like it's now being dealt with, so wait and see what transpires regarding the correction.

Dazed_and_C0nfused

kelsbrobonny said:

I have finally received my HMRC tax calculation for 2023/24 and found that interest on an ISA has been taxed.  I followed Martin Lewis's advice, did the online calculation and asked the building society to switch my low interest ISA to their higher interest ISA (with a small penalty, but still more than worth it).  I did not remove the funds - it was just an internal switch, which they competed and documented for me.  Not sure why the full interest has now been taxed.  I contacted HMRC and after lengthy (16 page) online discussion, they have agreed to refer this on to the powers that be to see if this tax can be refunded. Has anyone had similar problems?

Assuming the ISA rules weren't broken it has most likely been taxed because the building society reported it as non ISA interest by mistake.

Assuming HMRC get confirmation from the building society that this was tax exempt interest then they should just recalculate your liability for 2023-24.  And update the current year's tax code if that is also impacted.

Not sure there will necessarily be any tax needing to be "refunded" though.

fuzzzzy

kelsbrobonny said:

I have finally received my HMRC tax calculation for 2023/24 and found that interest on an ISA has been taxed.  I followed Martin Lewis's advice, did the online calculation and asked the building society to switch my low interest ISA to their higher interest ISA (with a small penalty, but still more than worth it).  I did not remove the funds - it was just an internal switch, which they competed and documented for me.  Not sure why the full interest has now been taxed.  I contacted HMRC and after lengthy (16 page) online discussion, they have agreed to refer this on to the powers that be to see if this tax can be refunded. Has anyone had similar problems?

Yes I once had ISA interest from Leeds Building Society taxed by HMRC. I assumed it had just been reported in error by Leeds BS as taxable interest. It was quite a small amount and I did not have the time or the headspace to sort it out so I just let it go. I always check all my interest payments now to make sure my figures tally with HMRC.