Rarely have I stumbled across a greater untruth than HM Revenue & Customs’ catchy advertising slogan “tax doesn’t have to be taxing”.
Anyone who has filled out a self-assessment tax return or tried to work out their future tax bills is likely to have found it very taxing.
It seems that now even HMRC is finding the tax system too difficult to navigate. Successive governments have made significant changes to the regime in recent years, and it looks like the taxman just can’t keep up.
The introduction of the dividend allowance and personal savings allowance, as well as increasing the personal allowance and changes to National Insurance are just some of the shifts in the past couple of years.
Last week HMRC admitted it was struggling to properly calculate how the dividend allowance applies to some individuals’ taxes.
Launched in April 2016, the dividend allowance permits individuals to earn up to £5,000 in dividend income before they face tax. We are now seeing the first tax returns being filled out for the 2016-17 tax year (relax, these are not due until January 2018) – and it’s not been smooth sailing.
Software glitches at HMRC are being blamed for the fact that the system cannot correctly work out how the dividend allowance, the personal savings allowance (a tax-free limit for savings income) and the tax-free personal allowance all fit together.
HMRC said the move only affected a “very small percentage” of self-assessment taxpayers and that no tax had been wrongly paid.
It’s not the first faux pas for the taxman – it has recently been caught adding errors to tax returns.
Last month Telegraph Money highlighted the errors HMRC had made recording “Class 2” National Insurance Contributions (NICs) for self-employed people. From April 2015, workers’ “Class 2” National Insurance contributions have been declared on self-assessment tax returns. Previously they were paid to HMRC by direct debit.
HMRC again blamed the errors on a “technical fault” with its systems, and said it had only involved a few people. But after publishing the story we received many emails from those affected.
HMRC has invested heavily in its “snooper computer” in recent years giving it more power than ever to gather information on individuals’ income from various places. After spending £100m or more HMRC’s “Connect” system now draws information from myriad government and corporate sources to create a profile of each taxpayer’s total income.
While this impressive technology is helping to unearth undeclared income, it’s of minimal use if the taxman can’t then work out the tax due.
If HMRC can’t get it right, what hope is there for the rest of us?
Article taken from The Telegraph – http://www.telegraph.co.uk/tax/income-tax/hmrc-struggles-cope-tax-changes-hope-rest-us/