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HMRC software glitch hits dividend tax returns

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IT glitches in HM Revenue and Customs’ software may mean individuals will overpay by hundreds of pounds after the tax year came to a close on Wednesday, tax experts have said.

Tweaks to dividends and savings income taxation were branded “horrendously complex”, as the interplay between the zero per cent savings rate bands and tax-free allowances for dividend and savings threshold has caused issues for HMRC’s systems, the Financial Times reports.

HMRC has asked affected individuals to file paper returns as it prepares a fix ahead of 2017-18 returns, the paper reports.

Tax practitioner support manager at the Institute of Chartered Accountants in England and Wales Caroline Miskin said: “They seem to struggle to implement software changes necessary to reflect changes in law,” noting similar coding problems had occurred in the past.

However, she said the issue had affected only a “quite small” group of individuals.

The Revenue has published a note on its website listing groups who have exclusions for online filings since they may have been affected.

Business owners are likely to form part of these, as HMRC has given an exclusion for those earning above £145,000, with non-dividend income accounting for between £27,000 and £32,000.

This group risks having too many dividends taxed at the 45p additional rate because of an incorrect allocation of the allowance, and could potentially be £280 out of pocket.

An HMRC spokesperson told the FT: “A very small percentage of self-assessment taxpayers who have an unusual combination of income types currently have to use paper tax returns. We are constantly improving our online services to make them more comprehensive and user friendly. Last year more than 9.5m people successfully submitted tax returns online.”

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