HM Revenue & Customs helplines are facing a deluge of calls as more people are dragged into paying new taxes as a result of the government’s frozen tax thresholds.
The Office for Budget Responsibility forecasts there will be 1.2 million more taxpayers this year, with a further 700,000 more expected next year.
Figures suggest that an estimated 1.8 million extra people will be pushed into paying dividend tax by the end of the next tax year compared to 2022/23, after the government slashed the tax-free limit from £2,000 to £500 by April next year. On top of that, 260,000 individuals and trusts will pay capital gains tax for the first time over the next two years.
Furthermore, rising interest rates means far more people are breaching their tax-free Personal Savings Allowance, with 970,000 more people expected to pay tax on their savings when compared to the previous tax year.
Laura Suter, head of personal finance at AJ Bell, said: “The government’s stealth tax raid means millions more people will be dragged into paying new taxes this year, which inevitably means yet more strain on HMRC’s already overburdened phone lines.
“A litany of tax changes from frozen tax bands to reducing tax-free limits for wealth taxes to higher returns on savings all mean that more people are paying more tax and often for the first time ever. People who have filed a self-assessment or haven’t dealt with a particular tax before are far more likely to need additional support, meaning calling HMRC’s helplines.”
Despite this, HMRC has not been given any additional budget to deal with the increase in taxpayers and will be expected to absorb the cost of servicing them, said Suter.
Suter added that more people will also breach the child benefit high income charge and will need to file a tax return and repay tax, while those earning more than £100,000 also expected to file a tax return.
Suter said: “You only have to glance at HMRC’s Twitter page to see how frustrated customers are, reporting being on hold for extended periods or being cut off multiple times in their attempts to get their queries resolved.
“It’s then unsurprising that penalties for late filing of tax returns or late payment of tax are rising. We’d expect this to surge as more taxpayers are pushed into self-assessment and paying tax – with many not realising they even need to file a return.”
Suter called on the government to consider re-directing some of its extra revenue from its tax changes towards HMRC to ensure taxpayers can receive adequate support.
She added: “Boosting HMRC’s budget so it can deal with the influx of calls generated by the Treasury’s tax raising won’t fix the public’s annoyance at the increasing tax burden, but it would mean they don’t have to wait on hold for hours or potentially face fines for errors in their returns.”
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