Her Majesty's Revenue and Customs (HMRC) is undertaking a review of more than 100,000 tax calculations for the 2025-26 tax year. This action follows the identification of a longstanding software problem within its IT infrastructure.
The technical issue can lead to the incorrect allocation of savings and income allowances, which may have resulted in some taxpayers paying more tax than required. Specifically, the flaw affects how HMRC applies the 'beneficial ordering' rule, which dictates that allowances and reliefs should be allocated to produce the lowest possible tax bill.
The problem primarily impacts individuals who do not file a self-assessment tax return but have multiple income streams, such as pensions, savings interest, or dividends, in addition to their Pay As You Earn (PAYE) salary. For the 2024-25 tax year, the average discrepancy was reportedly less than £80, though individual amounts can vary.
HMRC first acknowledged this issue in 2021. New legislation, introduced through the Finance Act 2026, will amend the beneficial ordering rules, coming into effect on 6 April 2027. HMRC anticipates these changes will significantly reduce the number of affected cases to approximately 20,000 from next year.