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Pensioners hit by tax codes glitch

2:17pm Monday 8th February 2010

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Thousands of pensioners may have been issued with the wrong tax code following the introduction of a new computer system at HM Revenue & Customs, it has emerged.

HMRC warned that people who started to claim their state pension during the 2009/2010 tax year may have been given the wrong tax code for this April, meaning they could pay too little or too much tax.

But it does not know how many people have been affected by the problem, and could not say how much people may be overcharged by.

It is also thought married couples and civil partners aged 76 and over could lose their married couples allowance, which was worth up to £6,965 during the current tax year, due to the glitch.

The problem has been caused by the introduction of a new computer system, which combines information on people's National Insurance contributions and the Pay As You Earn scheme for the first time.

In some cases, the system appears not to have information on people leaving jobs, meaning those who have stopped working and started drawing a pension are being treated as if they have two income streams. The problems are also affecting people with more than one job, or those who have changed jobs in the past few years.

The Low Incomes Tax Reform Group said: "Like many new computer systems, the information going in has produced unexpected errors coming out and although HMRC are battling hard to resolve them, they will not totally succeed before tax codes are issued, or even before tax starts to be deducted in April. So out of the millions of pensioner tax codes going out over the next few weeks, a significant number will be incorrect."

An HMRC spokeswoman said: "We are continuing to improve the system and address any issues brought to our attention.

"We accept and very much regret that errors have occurred in some of the notices that have issued but the majority of codes are right. We recognise that some of the data brought forward from previous systems may be inaccurate and we are taking every opportunity to correct that.

"If any customer has concerns about the accuracy of their coding notice they should contact us so that we can review and correct as necessary."

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