- HMRC helplines faced with increasing number of taxpayer calls due to frozen thresholds and changes to tax-free allowances
- OBR forecasts there will be 1.2 million more taxpayers this tax year, with a further 700,000 more expected next year
- First permanent secretary and chief executive of HMRC Jim Harra says HMRC plans to ‘make efficiencies’ to absorb additional departmental costs
Laura Suter, head of personal finance at AJ Bell, comments:
“The government’s stealth tax raid means millions more people will be dragged into paying new taxes this year, which inevitably means yet more strain on HMRC’s already overburdened phone lines.
“A litany of tax changes from frozen tax bands, to reducing tax-free limits for wealth taxes, to higher returns on savings all mean that more people are paying more tax – and often for the first time ever. People who have never filed a self-assessment or haven’t dealt with a particular tax before are far more likely to need additional support, meaning calling HMRC’s helplines.
“It’s no secret that HMRC has been struggling to maintain its customer service levels as more people call with tax queries that can’t be handled online. The controversial summer shutdown of the self-assessment helpline from the tax authority was intended to redirect customer service staff to other queries, but appears to have created a huge backlog of self-assessment queries that it’s now being bombarded with.
“The OBR forecasts that there will be 1.2 million more taxpayers in the current tax year, when compared to last year, and another 700,000 next tax year. What’s more, HMRC hasn’t been given any additional budget to deal with this increase in taxpayers, and is expected to absorb the cost of servicing them.
“We know that an estimated 1.8 million extra people will be pushed into paying dividend tax by the end of the next tax year, when compared to 2022/23*, after the government slashed the tax-free limit from £2,000 down to £500 by April next year. On top of that, 260,000 individuals and trusts will pay capital gains tax for the first time over the next two years, thanks to those tax-free allowances being cut too.
“Rising interest rates mean far more people are breaching their tax-free Personal Savings Allowance, pushing more into paying tax. In the current tax year it’s estimated that 970,000 more people will pay tax on their savings, when compared to the previous tax year**. While this tax is typically reclaimed through people’s tax codes, it will mean some people have to file self-assessment tax returns. Even if they don’t have to file a tax return, understandably many taxpayers will have questions about how and why they owe tax – meaning yet more calls to the helpline.
“On top of this high wage growth is pushing more people past thresholds that mean they may have to interact with HMRC. More people will breach the child benefit high income charge, when they start to lose the benefit, and so have to file a tax return and repay tax. In addition, anyone who earns more than £100,000 has to file a tax return – and rising wages will push more people past this threshold. The rising prevalence of people adopting ‘side hustles’ to help boost their incomes in the cost-of-living crisis will put yet more strain on the tax helpline, as anyone with more than £1,000 of earnings from another source has to file for self-assessment.
“You only have to glance at HMRC’s Twitter page to see how frustrated customers are, reporting being on hold for extended periods or being cut off multiple times in their attempts to get their queries resolved. Even celebrities are getting involved to bemoan HMRC’s service levels.
“It’s then unsurprising that penalties for late filing of tax returns or late payment of tax are rising, with more than 1.4 million taxpayers charged interest by HMRC for late payment of tax in the 2020-21 tax year***. We’d expect this to surge as more taxpayers are pushed into self-assessment and paying tax – with many not realising they even need to file a return.
“It’s not unrealistic to think that the government should re-direct some of the billions it’s generating from these tax changes towards HMRC to ensure that the taxpayers who require help and support can actually receive it. Boosting HMRC’s budget so it can deal with the influx of calls generated by the Treasury’s tax raising won’t fix the public’s annoyance at the increasing tax burden, but it would mean they don’t have to wait on hold for hours or potentially face fines for errors in their returns.”
*Based on figures released by HMRC under a Freedom of Information request made by AJ Bell. 635,000 more people will pay tax on dividends in 2023/24, when the tax-free allowance is cut from £2,000 to £1,000, and 1,115,000 additional individuals will be brought into paying dividend tax from April 2024, when the allowance is cut to £500.
**Based on figures released by HMRC under a Freedom of Information request made by AJ Bell. Table below shows the figures:
***Based on a Freedom of Information request made by AJ Bell. The FOI shows that 1.43 million people were charged interest on late tax payments for the 2020-21 tax year, up from 1.24 million before the pandemic. Additionally, the number of people who missed the deadline for filing their tax return and hence paid a late filing penalty was 290,000 and 270,000 for tax years 2019-20 and 2020-21 respectively. Some faced a double-whammy, with 110,000 and 90,000 in each year hit by both a late filing penalty and interest charges.
