Source of the update
The Institute of Chartered Accountants in England & Wales (ICAEW) has reported that HMRC has identified an error affecting some taxpayers where incorrect State Pension figures were used in certain PAYE end of year reconciliations, Self-Assessment pre-populated data and Simple Assessment calculations. The issue came to light following a letter from HMRC to Parliament’s Public Accounts Committee.
What has happened?
The State Pension is taxable income, even though tax is not normally deducted before it is paid. HMRC’s systems use State Pension information when calculating an individual’s tax position.
In some cases, the State Pension figure held by HMRC was incorrect. This means that taxpayers who relied on the pre-populated information provided by HMRC may have submitted, or may be preparing to submit, tax returns using an inaccurate figure.
The issue is not expected to affect every taxpayer, but it serves as an important reminder that information supplied by HMRC should always be checked against your own records.
What could the consequences be?
If an incorrect State Pension figure is included on a tax return, the amount of tax calculated may also be incorrect.
Some taxpayers could pay more tax than they should, while others may underpay and later receive an unexpected demand from HMRC. Incorrect figures may also lead to delays if a tax return needs to be amended after it has been submitted.
Although HMRC provides information to help taxpayers complete their returns, the legal responsibility for ensuring that a tax return is complete and accurate remains with the taxpayer.
What should you do?
If you receive the State Pension and complete a Self-Assessment tax return, compare the State Pension figure shown on your return with your own records. These may include your annual State Pension statement, bank statements or correspondence received from the Department for Work and Pensions.
If the figures do not agree, seek advice before submitting your return. It is much easier to resolve discrepancies before filing than to amend a return afterwards.
Preparing your tax return well before the January deadline also provides more time to identify and correct any errors.
We can help
If you are unsure whether your State Pension has been reported correctly or would like us to review your Self-Assessment tax return before it is submitted, please contact us. We will be pleased to check the figures and help ensure that you pay the correct amount of tax.
If you feel this alert could help a business colleague or family member, please feel free to share it with them.
