In recent days, HM Revenue & Customs (HMRC) has been forced to remove a popular online calculator from its website, after it emerged that the software was giving users “incorrect” information about how much money they can save into their pensions.
Under existing pension rules, pension contributions of up to £40,000 made by standard rate taxpayers will qualify for tax relief, but higher earners will face a reduced allowance – which could be as low as £10,000 a year for people on the highest incomes.
Despite this, taxpayers are entitled to ‘carry forward’ any annual allowances from up to three years if these have not previously been used.
However, HMRC’s online calculator has been “drastically underestimating” the amount of money people can save into their pensions, a report in The Telegraph reveals.
In many cases, the calculator’s errors have related to the rules governing ‘carry forward’ allowances and confusion stemming from tax changes introduced in April 2016, which saw individuals earning between £150,000 and £210,000 subjected to a new, tapered allowance.
According to reports, HMRC’s calculator was coming up with the wrong figures for the 2017/18 and 2018/19 tax years due to its failure to take such matters into account.
Former pensions minister Steve Webb described the errors as “totally unacceptable.”
“It’s 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,” he said.
Following the concerns raised, HMRC has removed the tool from its website and apologised for the technical issues with its software.
On Wednesday 18 April 2018, an HMRC spokesperson 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.”
In the meantime, HMRC is advising individuals to manually calculate their annual pension allowance.
