UK Monthly Tax Revenue Hits £87.3 Billion! Savers Wrongly Charged Thousands in Extra Tax! Is Household Inflation Pressure Set to Rise Again?
- TBA
- 59 minutes ago
- 5 min read
Savers forced to overpay thousands in tax after HMRC errors
The UK tax authority (HM Revenue & Customs, HMRC) has recently been accused of incorrectly taxing large numbers of savers due to system errors, with some taxpayers reportedly being charged thousands of pounds in excess tax. An investigation by The Telegraph found that after obtaining bank account data, HMRC miscalculated savings interest tax and automatically adjusted taxpayers’ PAYE tax codes (pay-as-you-earn codes), resulting in reduced take-home pay and unexpected tax bills for many savers.
The issue is said to date back to 2016, when then-Chancellor George Osborne introduced new rules requiring banks to report customers’ annual savings interest to HMRC. HMRC then used this data to automatically assess whether taxpayers owed additional tax and adjusted tax codes accordingly to recover the amounts.
However, multiple savers have reported serious calculation errors by HMRC, including:
Double-counting interest income
Incorrectly treating tax-free ISA interest as taxable income
Using inaccurate estimated figures
Incorrectly linking other people’s accounts to taxpayersSome financial advisers say such cases are becoming increasingly common.
In one reported case, a taxpayer had actual savings interest of just £94, but HMRC estimated “untaxed interest” at £3,847, resulting in an overpayment of £1,476 in tax.
In another case, HMRC mistakenly taxed hundreds of savers on interest held in ISA accounts, which are supposed to be tax-free.
Former Conservative Party leader Sir Iain Duncan Smith criticised HMRC, saying: “HMRC has for too long been a department that operates without proper restraint. Its intrusion into people’s private affairs is excessive, and its failures ultimately leave taxpayers to pay the price.”
Under the current UK system:
Basic-rate taxpayers have a £1,000 annual tax-free allowance on savings interest
Higher-rate taxpayers have a £500 allowance
Additional-rate taxpayers have no allowance
Since these thresholds have remained unchanged since 2016, rising interest rates have brought more people into the tax net. Data shows that 2.76 million people paid tax on savings interest last year.
HMRC said in response that actual savings interest figures for the 2025–26 tax year will be confirmed in November this year. Taxpayers who believe their data is incorrect are encouraged to submit the correct figures in advance for verification.
HMRC tax take hits £87.3bn as fiscal drag drives record PAYE
The latest data released by HM Revenue & Customs (HMRC) shows that in April 2026, the UK collected £87.3 billion in tax revenue and National Insurance contributions, an increase of £6.3 billion compared with the same month last year. Among the main components, PAYE income tax and National Insurance contributions rose most significantly to £52.5 billion, while VAT receipts increased to £20.5 billion.
Analysts note that this rapid growth in tax revenue is largely driven by “fiscal drag”. As income tax thresholds in the UK have remained frozen since 2016 while wages continue to rise, an increasing number of taxpayers are being pushed into higher tax brackets. As a result, even when real income growth is limited, the overall tax burden continues to increase.
Against this backdrop, the structure of the UK taxpayer base is expected to shift further in the coming years, with more middle-income households moving into higher tax bands.
Meanwhile, although UK inheritance tax (IHT) receipts in April 2026 fell slightly to £700 million, down £65 million year-on-year, most analysts believe this is only a short-term fluctuation, with the long-term trend still pointing upward.
The UK inheritance tax threshold remains frozen at £325,000, unchanged since 2009. Over the same period, UK house prices have risen by more than 75%, meaning more ordinary households are being drawn into the inheritance tax net as property values increase. The Office for Budget Responsibility (OBR) has even projected that the number of estates liable for inheritance tax could nearly double by 2030.
Many industry analysts argue that inheritance tax is increasingly functioning as a tax on rising property values rather than a levy targeting the very wealthy. In London and the South East of England, even a typical family home can now exceed the inheritance tax threshold. Data also shows that over the past five years, five London constituencies alone generated more inheritance tax revenue than Scotland and Wales combined.
In addition to existing tax pressures, the UK is also advancing several wealth tax-related reforms, including changes to the non-domiciled (non-dom) regime, reforms to business property relief, and plans to bring unused pension pots into the scope of inheritance tax from April 2027.
Experts widely believe that these combined changes will significantly increase the long-term tax burden on both high-net-worth individuals and middle-income households. Some market participants have even expressed concern that the UK may further expand wealth taxation in the future, potentially reducing its attractiveness to entrepreneurs and wealthy individuals.
Against this backdrop of ongoing policy changes, experts warn that individuals attempting to carry out inheritance tax or wealth planning without professional advice may make costly mistakes, and recommend seeking professional tax and wealth management guidance in advance.
Inflation falls to 2.8% but is expected to rise from here
The UK Office for National Statistics (ONS) has released the latest data showing that inflation in April fell more than expected, driven mainly by lower gas and electricity bills. Over the 12 months to April, UK inflation dropped from 3.3% in March to 2.8%.
However, many economists believe this decline may only be temporary. With ongoing tensions in the Middle East pushing up global oil prices and energy costs, inflation in the UK is expected to rise again to around 4% by the end of this year. Price pressures may therefore intensify again in the coming months.
It is important to note that a fall in the inflation rate does not mean prices are falling overall, but rather that prices are still rising—just at a slower pace than before.
Middle East tensions push fuel prices higher
Despite the overall slowdown in inflation, geopolitical tensions in the Middle East have driven up international oil prices, leading to continued increases in UK fuel costs, which have reached their highest levels since 2022.
ONS data shows that in April, average petrol prices in the UK rose to 156.8 pence per litre, while diesel prices increased by more than 30 pence to an average of 190 pence per litre. The UK’s RAC (Royal Automobile Club) further reported that petrol prices continued to climb in May, reaching a new peak of 158.52 pence per litre last week.
KPMG Chief Economist Yael Selfin said the 2.8% inflation reading is “very likely to represent the lowest point for some time.” She expects that inflation will trend upward for most of 2026 and approach 4% by year-end.
Inflation outlook and policy response
With concerns over further energy price increases, UK Chancellor Rachel Reeves is expected to announce additional measures to support households facing rising living costs linked to Middle East tensions.
Meanwhile, the Bank of England remains committed to its 2% inflation target. It typically uses interest rate policy to manage inflation by influencing spending by households and businesses. When inflation is above target, the Bank usually raises interest rates to reduce demand and slow price growth.
However, many of the current inflation pressures are driven by external factors—particularly rising global oil prices due to geopolitical instability. As a result, even if interest rates are increased further, their effectiveness in curbing current price rises may be limited.
Why TB Accountants?
Professional Assurance: Our team includes ACA members and ACCA-certified professionals, delivering services to the highest industry standards.
Responsive Service: We respond to your inquiries within 24 hours, ensuring efficient communication across time zones.
Multilingual Support: Services available in English, Mandarin, Cantonese, Japanese, French, German, Spanish, Italian, Turkish, and more.
Trusted by Clients Worldwide: Consistently praised by global clients for proactive, professional, and reliable accounting and tax support.
For individuals and businesses looking for UK taxation services, use our contact form to get in touch for more information.
Get in touch with us at info@tbagroup.uk or for a free one-to-one consultation.
