Have HMRC made an error on my tax owed?

Dazed_and_C0nfused

HUMBUG said:

mybestattempt said:

Dazed_and_C0nfused said:

You can ask for the Personal Allowance to be allocated in whichever way gives the lowest liability.

Once the Personal Allowance has been allocated though the remaining income (where there is any) must be taxed in this order,

Non savings non dividend income first
Interest second
Dividends last

So the op can simply ask for £92 of the PA to be allocated to the interest £1,392 to the dividend income.  If the rest is used by the pension and investment income, whatever that is, then it means £6,000 of the interest is taxed at 0%.  As is the remaining dividends.

End result, assuming no Gift Aid donations were made, is no liability.

Yes, looking at this further I can see that s25 ITA 2007 requires the PA to be allocated to achieve the lowest liability.

Is there a reason why the HMRC calculation doesn't automatically allocate the PA to give the lowest liability?

I've now received a response from HMRC and they say their calculations are correct and I do owe them that £92 (exact amount £91.35).

Here is the extract from their reply but I was unaware of the bolded sentence below. I've tried searching on HMRC website to confirm whether that statement is true , but can't find anything .  Do you know whether it's correct or not?

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My Investigation

Records show the 2023-24 underpayment of tax we have charged for is correct, and is

calculated after we took into account:

• Income from Company Pension Scheme - £11,080 plus

• Bank & Building Society Interest (BBSI) of £6,092, equals £17,172, minus

• Personal Allowances of 12,570, equals £4,602 remaining

• Starter Rate for Saving of £5,000 minus £4,602, meaning all your BBSI is tax-free.

Whilst we also calculated £2,044 of UK Dividend income, you do also receive £1,000 Dividend

Allowance of £1,000, leaving a taxable amount of £1,044 which is taxed at the lower rate for

Dividends of 8.75%.

£1,044 x 8.75% = £91.35

Whilst I note you believe you are entitled to both the £5,000 Starter Rate For Savings and the

additional £1,000 Personal Saving Allowance (PSA), this is not the case.

As your income falls below the £17,570 you receive up to the £5,000 Starter Rate For Savings

Allowance. The additional £1,000 (PSA) only applies to individuals earning over £17,570.

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I would just write back and explain you wish to avail yourself of the legislation at s25 ITA 2007 and have your Personal Allowance allocated in a different way as that produces a smaller liability.

Unless you want to be going back and forth for a while you might find it sensible to provide your own allocation.

I think this would result in everything remaining (in brackets) being taxed at 0%.

Pension income £11,080 (£0)
Interest £446 (£5,646)
Dividends £1,044 (£1,000)

HUMBUG

Many thanks everyone , I  am in contact with a senior person at HMRC (a complaints investigation manager), so I will share your feedback with him.  

Unfortunately , I had to raise a complaint because they didn't reply back to my letter sent in Dec 24.

TheSpectator

HUMBUG said:

Many thanks everyone , I  am in contact with a senior person at HMRC (a complaints investigation manager), so I will share your feedback with him.  

Unfortunately , I had to raise a complaint because they didn't reply back to my letter sent in Dec 24.

Hate to burst your bubble but they won't be particularly 'senior' and not neccessarily knowledgeable on the issue you have.

HUMBUG

TheSpectator said:

HUMBUG said:

Many thanks everyone , I  am in contact with a senior person at HMRC (a complaints investigation manager), so I will share your feedback with him.  

Unfortunately , I had to raise a complaint because they didn't reply back to my letter sent in Dec 24.

Hate to burst your bubble but they won't be particularly 'senior' and not neccessarily knowledgeable on the issue you have.

I think you may be correct .  Can't help thinking this senior complaints manager has referred my dispute back to the same person who did the manual estimate of tax I am supposed to be owing .  Maybe he is just repeating the logic (whether incorrect or not) used in the estimation and insisted it was correct. 

I hope this person (or system) is not making the same error (if it is an error) on other customer income tax estimates.

TheSpectator

HUMBUG said:

TheSpectator said:

HUMBUG said:

Many thanks everyone , I  am in contact with a senior person at HMRC (a complaints investigation manager), so I will share your feedback with him.  

Unfortunately , I had to raise a complaint because they didn't reply back to my letter sent in Dec 24.

Hate to burst your bubble but they won't be particularly 'senior' and not neccessarily knowledgeable on the issue you have.

I think you may be correct .  Can't help thinking this senior complaints manager has referred my dispute back to the same person who did the manual estimate of tax I am supposed to be owing .  Maybe he is just repeating the logic (whether incorrect or not) used in the estimation and insisted it was correct. 

I hope this person (or system) is not making the same error (if it is an error) on other customer income tax estimates.

If you can't get it resolved because 'computer says no', in your shoes I'd be insisting on completing a Self Assessment tax return to get the correct answer.

Unfortunately it's difficult to get hold of anyone with the technical competence on matters like this these days.

HUMBUG

TheSpectator said:

HUMBUG said:

TheSpectator said:

HUMBUG said:

Many thanks everyone , I  am in contact with a senior person at HMRC (a complaints investigation manager), so I will share your feedback with him.  

Unfortunately , I had to raise a complaint because they didn't reply back to my letter sent in Dec 24.

Hate to burst your bubble but they won't be particularly 'senior' and not neccessarily knowledgeable on the issue you have.

I think you may be correct .  Can't help thinking this senior complaints manager has referred my dispute back to the same person who did the manual estimate of tax I am supposed to be owing .  Maybe he is just repeating the logic (whether incorrect or not) used in the estimation and insisted it was correct. 

I hope this person (or system) is not making the same error (if it is an error) on other customer income tax estimates.

If you can't get it resolved because 'computer says no', in your shoes I'd be insisting on completing a Self Assessment tax return to get the correct answer.

Unfortunately it's difficult to get hold of anyone with the technical competence on matters like this these days.

I requested they try and resolve my issue without the need for me to escalate & repeat the issue to another Tier 2  complaint handling department. 

To be fair, they have now responded back and admitted they made an error and no tax is due. 

Many thanks to everyone for your assistance.

HUMBUG

It seems that my issue has not been fixed by HMRC. 

After my complaint had been dealt with on March 19th, I received an automated message saying that my tax code had been changed and that I could see the details by logging into my online account under PAYE tab.

I did that immediately but all it showed was an old tax code change done back in December 2024 . Naturally, I thought there might be some delay so left it a few weeks and checked again today.  But it's still showing the old tax code change in Dec 24 , so it seems they haven't changed my tax code on the online PAYE webpages.

I've contacted them to try and get some confirmation about what is going on.

TheSpectator

Could it be your 25/26 code which, from memory, might not be intuitive to find?

Dazed_and_C0nfused

HUMBUG said:

It seems that my issue has not been fixed by HMRC. 

After my complaint had been dealt with on March 19th, I received an automated message saying that my tax code had been changed and that I could see the details by logging into my online account under PAYE tab.

I did that immediately but all it showed was an old tax code change done back in December 2024 . Naturally, I thought there might be some delay so left it a few weeks and checked again today.  But it's still showing the old tax code change in Dec 24 , so it seems they haven't changed my tax code on the online PAYE webpages.

I've contacted them to try and get some confirmation about what is going on.

Have you checked for the code for the next tax year?

HUMBUG

TheSpectator said:

Could it be your 25/26 code which, from memory, might not be intuitive to find?

Sorry for the delay in replying and I think you must be correct . Here is the extract from  their recent reply to me:

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The automated email of 19 March 2025 was linked the tax code of K511, changed from K556 and relates to the current 2025-26 tax year. This was changed following my investigation into your complaint, and no longer includes the underpayment of £91.35 as promised.

The tax code of K457 Week 1 related to a tax code issued to you for 2024-25 on 5 December 2024.

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