HMRC forced to take down tax relief calculator from its website

Pension experts have criticised HMRC for failing to remove a flawed tax relief calculator, despite being aware that it was providing consumers with incorrect advice.

Top-rate taxpayers risked losing thousands of pounds of tax relief when planning their financial affairs for the next year by using the online tool.

HMRC has apologised and admitted that it was aware of the flaws in the calculator. Despite only taking it down late last night, it is believed that officials had been aware of the errors in the tool for almost two weeks.

The current 2018/19 tax year presents a final opportunity for top earners to take advantage of the £40,000 pension allowance carried forward from 2015/16, as taxpayers can utilise their allowance from each of the previous three tax years in order to claim tax relief.

The dubbed “tapered annual allowance” was introduced in April 2016 and limited relief afforded to top-rate earners to contributions as low as £10,000. If these top-earners did not utilise their full £40,000 allowance in 2015/16, they were allowed to carry it forward to 2018/19. However, HMRC’s tax relief calculator advised otherwise, informing users that they could not carry the tax shield into the current year.

Former pensions minister Steve Webb commented: “It is totally unacceptable for an official government website to continue to operate when it contains blunders of this sort.

“It is beyond belief that they are knowingly allowing taxpayers to get incorrect information from their website and potentially to make major financial decisions on the strength of dodgy data.”

Tapered relief has also been labelled as “one of the single most complicated aspects of the pension system” by AJ Bell’s Charlie Musson.

Musson further added: “If the HMRC website can’t get the answer right it says it all really – most high earners will have no chance of working out how much they can put in their pension.

“Mistakes like this undermine its legitimacy; the fact they knew the calculator was wrong and still left it up, opens it to accusations it was deliberately seeking to mislead investors to reduce the amount of pension tax relief it has to pay out.”

A spokesperson for HMRC said: “We are sorry that the calculator isn’t working as it should in some cases. The calculator is no longer available as it is being updated.”

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