Thousands of savers across the UK are at risk of significantly overpaying their taxes due to a major administrative error by HM Revenue and Customs (HMRC). The tax authority has been issuing duplicate bills to households, creating confusion and potential financial hardship for many.
The Double Billing Debacle
Earlier this year, HMRC distributed initial tax bills to households that notably excluded any tax owed on savings interest paid by banks and building societies. This initial oversight has now led to a more serious problem.
Many savers have subsequently received a second tax demand for the 2024-25 tax year under the "simple assessment" system. Alarmingly, these follow-up letters include both the tax owed on savings interest plus the amount from the first letter, even if taxpayers have already settled their original bill.
Expert Warnings and Potential Consequences
Joseph Adunse, a tax specialist at Moore Kingston Smith, has highlighted the serious risks facing affected taxpayers. He stated there is a "real danger" that recipients of these duplicate demands will "panic" and pay the full amount without realising they don't owe some, or all, of the additional tax.
"In the rush to collect as much tax as possible, HMRC has been sending several simple assessment letters to bewildered taxpayers," Adunse explained. "The problem is that the agency has bypassed its vast data warehouse and is sending affected taxpayers a total tax bill including tax that was demanded in an earlier letter."
Understanding Simple Assessments
The simple assessment system was introduced in 2016/17 with the intention of preventing taxpayers from being unnecessarily drawn into the self assessment system. It allows HMRC to calculate tax directly when they possess sufficient information about an individual's tax liability.
These assessments, delivered on form PA302, should only be issued when tax cannot be collected through the PAYE system. Importantly, taxpayers have 60 days to challenge the figures from the date the assessment is issued.
Despite being designed to simplify the process, this relatively new approach has proven "far from simple" for many dealing with the current duplicate billing situation.
An HMRC spokesman responded to the situation, stating: "We can only send out simple assessment letters to customers who owe tax on savings interest after we receive this information from banks. Our letter clearly explains how customers can pay what they owe."
This development raises significant concerns about HMRC's administrative processes and the potential financial impact on thousands of savers who may now face the stress of challenging incorrect tax demands.
