HMRC ‘flying blind’ on over 1.2m tax demands after failing to track error rates 

HMRC has been accused of “flying blind” on over 1.2m tax demands after admitting it does not track how many are challenged or cancelled due to errors.

The tax authority issued 1,254,201 individual PA302 simple assessment tax calculations in the 2024/25 tax year, according to figures obtained by City AM via a Freedom of Information request.

PA302 forms are sent to taxpayers instead of having them fill out self-assessment tax returns. HMRC uses data it holds from employers, pension providers, banks and government departments to determine how much tax is owed automatically.

Common triggers for a PA302 include a person owing income tax that cannot be automatically collected through the PAYE system, owing HMRC £3,000 or more and having untaxed income, such as high savings interest, which does not require a full self assessment return.

But in response to the FOI, HMRC refused to disclose how many calculations were reduced, cancelled or withdrawn, stating that retrieving the data would exceed cost limits as it does “not hold readily available figures”.

The tax authority admitted the data is not automatically collected and it does not track the total sum of tax incorrectly demanded.

Tracking failure

While the government department does log calls and queries for “operational purposes”, it said it does not distinguish standard enquiries from cases where a taxpayer challenges on grounds that calculations are incorrect.

“This information… does not enable us to identify reliably how many individual PA302 calculations were challenged specifically because the customer considered them to be incorrect,” HMRC wrote in its response.

Steve Webb, the former pensions minister and a partner at pension consultants LCP, said: “It is shocking that HMRC has so little management information about the million-plus tax demands it is sending out every year. 

“If they do not log how often people challenge these assessments and how often they are then withdrawn or revised, HMRC can have little idea of the scale of error or how this is changing over time.”

Outdated systems

The admission has triggered concerns over whether automated errors are quietly penalising Brits who are already feeling the pressure of frozen tax thresholds.

Hundreds of thousands of Brits have been dragged into higher tax bands in the past few years, leaving them exposed to income tax and being issued a PA302 form.

Personal allowance has been fixed at £12,570 since April 2021 and is currently not due to rise until the 2028/29 tax year. The hike in the state pension under the triple lock mechanism has also thrown more people into the income tax net.

One City figure said frozen thresholds and widened margin for error due to more people being issued the forms should be enough reason to begin logging this “kind of information”. Tax advisers estimate HMRC sent 1.8m forms in the 2025/26 tax year and the number will continue to grow.

Webb noted there may be “systematic reasons” why assessments are sent out in error that could “only be picked up if there was proper data on correction rates”.

“HMRC should start recording challenges to simple assessments, otherwise they are ‘flying blind’ when it comes to implementing this part of the tax system,” he said.

This is the latest in a string of accusations from industry figures and advisory boards that HMRC is overly reliant on outdated, legacy IT systems.

In 2025, the Treasury Select Committee criticised the body for still manually handling over 14m postal items, while the Public Accounts Committee has repeatedly targeted its technical shortcomings and rushed transition into using digital systems.

HMRC were contacted for comment.