Millions of people receiving the state pension or key benefits have been issued an urgent warning by tax authorities about potential errors in their tax payments. Financial experts are urging immediate action to avoid unexpected bills and costly penalties.
Who is at risk of tax errors?
Grace Hardy, a finance content creator and CEO of Hardy Accounting, has highlighted a significant risk for claimants of taxable state benefits. She explains that individuals receiving the state pension, Carer's Allowance, Employment and Support Allowance (ESA), or Jobseeker's Allowance (JSA) may be paying incorrect amounts of tax if these benefits are not accurately reflected in their tax code.
"If the claimant is in receipt of a taxable benefit – such as Carer's Allowance or the state pension – and this isn’t accounted for in their tax code, it is possible they could be paying too little tax," Ms Hardy stated. "They may end up with an extra bill at the end of the tax year as a result."
How to resolve a potential tax issue
The first step for anyone concerned is to identify where the responsibility for an error lies. Ms Hardy advises that an incorrect tax code is likely to be an HMRC error, whereas a mistake concerning benefit entitlement or payment amount would typically fall under the Department for Work and Pensions (DWP).
If an issue is uncovered, claimants can contact HMRC directly to seek a resolution. Alternatively, they can instruct an accountant to correct the error on their behalf.
Act now to avoid penalties and long waits
With the self-assessment tax return deadline of 31 January 2026 fast approaching, experts are warning of a perfect storm of long helpline waits and financial penalties.
Alastair Douglas, CEO of TotallyMoney, urged taxpayers not to delay. "Millions of taxpayers will need to complete their self-assessment returns before the end of the month. And, as we edge closer to the deadline, more and more people will be picking up the phone to call the HMRC helpdesk," he said.
He warned that phone lines are likely to be busiest towards the end of January and during the middle and latter parts of the day. "So, if you need help with your return, it’s best to get it sooner, rather than later," he advised.
Procrastination could prove expensive. HMRC will issue an automatic £100 fine to anyone who files their return up to three months late. On top of this, a late payment interest rate of 7.75% per year will be charged on any outstanding tax.
"Cracking on with your tax return might not only save you time, but also money," Mr Douglas concluded.
