HMRC error could mean thousands owe cash

Thousands of taxpayers face being hit with penalties and extra bills because of a blunder in HMRC's own systems.

The tax office has admitted that its online filing service was not updated in time to reflect Rachel Reeves' Autumn Budget increase in capital gains tax (CGT) rates.

As a result, anyone who disposed of assets on or after October 30 2024 risks being tripped up by inaccurate calculations if they file their return online.

Basic-rate CGT rose from 10% to 18%, while higher-rate went from 20% to 24%. But HMRC's system was finalised before the Budget, meaning returns do not automatically apply the higher rates.

David Wright, technical officer of the Association of Taxation Technicians, said mistakes were "inevitable".

He warned: "Some taxpayers affected by the rate change on October 30 2024 will not realise the change of rates when using HMRC's online filing service and will fail to include the CGT adjustment figure when filing their returns.

"This could result in HMRC questioning the tax return, and may lead to additional tax being payable, along with late payment interest and a penalty of up to 30 per cent of any underpaid CGT."

Around 378,000 people paid CGT in 2023-24, meaning tens of thousands could be at risk. Those most likely to be caught out are people who sell shares and complete their return without professional advice.

Charlene Young, senior pensions and savings expert at AJ Bell, said: "That's quite a big potential error brewing.

"There are two things here that people are unwittingly walking into: under-reporting and underpaying [of tax] and that comes with penalties."

Penalties can reach 30% of tax due if HMRC deems the mistake careless. Interest on late payments is currently set at 8%.

The tax office has begun writing to people who may already have filed incorrect returns. They are asked to check figures using HMRC's calculator and amend them within 30 days - or confirm to HMRC if their return is correct.

Wright said that even where no amendment is required, taxpayers will still face "extra hassle" because they must contact HMRC to confirm the information is accurate.

An HMRC spokesman rejected suggestions of a looming problem, they said: "Self-assessment customers will have everything they need to get their tax right. Online filers will be prompted to use our CGT calculator, which takes into account the mid-year rate change and is accompanied by guidance which makes clear how it should be used."

Online returns for the 2024-25 tax year must be submitted by January 31, with paper returns due by October 31.