As those who have had snafus with their pension drawdowns can attest to, HMRC's software fails to recognise one off payments and instead assumes the person will receive the same amount every month.
Hence, middle-income earners who then receive a bonus may find themselves being taxed as if they are taking home a much higher salary.
Former Liberal Democrat MP Sir Steve Webb, who now works at pension firm Royal London, said three of his colleagues had been impacted by the miscalculation.
“HMRC has a habit of taxing first and asking questions later, and this is yet another example.Sir Steve claimed HMRC had failed to inform his team about changes to their “personal allowance”.
It is absurd to assume that a one-off bonus received at the start of a financial year is going to be repeated throughout the year and to tax people on that basis.
People affected by this issue can have their monthly paypacket cut by hundreds of pounds with little or no notice and then have the hassle of contacting HMRC to get things put right.”
A spokesman form HMRC said if a customer’s tax code changes they are normally informed about this. HMRC said only a “small number” of people were affected by the glitch and issued an apology.
“We will work with the employer to investigate if a tax code notice was sent to these customers.”This "quirk" has been known about for sometime, therefore I am a tad surprised that people middle managers in Royal London were not aware of it.
Tax does have to be taxing.
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