A technical error in the HMRC tax return system could mean self-employed workers face a higher than expected tax bill in January.
It’s not the first time HMRC has been under the spotlight for technical failures. Back in January we reported on another glitch in the tax man’s systems.
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In our last report, the glitch caused some taxpayers to receive inaccurate payment reminders, which may have led to them paying less tax than they owed and receiving a fine – through no fault of their own.
Now, the problem centres on payment on account – the payment setup that was intended to help people who work for themselves spread out their tax bill, but which actually leads to difficulty in paying for some.
How does payment on account work?
Many self-employed workers file one tax return each January and make two payments each year – one in January and one in July.
The July payment is termed ‘payment on account’ because it requires you to pay six months in advance of the next January tax deadline. The theory is that it eases the burden of paying in one lump sum.
Check your tax bill
According to The Telegraph, many of the tax returns sent to the self-employed didn’t include the July payment on account. This means those taxpayers may receive a bigger bill than they were expecting in January, which could lead to cash flow issues.
If you haven’t already, it’s worth double checking your tax return to make sure you’re up to date with your payment on account and you’re not going to get any nasty surprises in the new year.
Interest to be added in January
HMRC said those who missed the 31 July tax return deadline due to its error wouldn’t be penalised for paying late. However, if the glitch leads to you not being able to afford to pay in January, you will face charges.
A spokesman for the tax authority said: “We are aware of an issue with payment reminders for a small number of customers.
“Anyone who is affected can contact us and we’ll put it right. Nobody will be charged additional interest due to this problem, as long as they pay the full amount due by the 31 January 2020.”
Tax man’s error handling a total fiasco
The Telegraph also spoke to accountants who voiced their concern over the tax authority’s handling of its own error.
Nimesh Shah from Blick Rothenberg said it was a “total fiasco”.
He added: “HMRC has known about this problem for over six months now, and has not done anything about it.
“Once again, HMRC’s communication around a known problem has not been good enough, and individuals have to either discuss the correct course with their accountant or follow up with HMRC to confirm exactly what they should be doing.”
If you’ve been affected by the latest HMRC system glitch, seek professional advice from an accountant or financial adviser.