HMRC is manually reviewing 107,000 tax calculations from the 2025-26 tax year after taxpayers complained that they had been overcharged. The underlying fault has existed for years – first acknowledged in 2021 – and still hasn’t been fixed.
The error affects how tax-free allowances are allocated across different income types, including earnings, pensions, savings interest, and dividends. The issue is known as the ‘beneficial ordering’ error, one of several HMRC system faults that can lead to taxpayers paying more tax than they owe.
Optimal use of allowances varies by individual circumstances, meaning misallocation can significantly affect how much tax someone pays. If you have multiple income sources (salary, pension, savings interest, dividends), you may be affected, especially if the system failed to allocate your personal allowance in the most tax-efficient way.
