HMRC error leaves thousands blocked from getting mortgages

This mismatch between what is legally owed and what appears in official records is causing problems during mortgage applications, where lenders require a perfect match between a person's tax documents and their HMRC file in order to verify income.

Because the records do not align, many self-employed applicants are being turned down for loans or are unable to remortgage, despite having done everything correctly.

Tax professionals have criticised the Government’s slow response, warning that the glitch is leaving people unable to move house, access credit, or progress financially, all while the housing market remains challenging due to high interest rates and limited supply.

Eamon Shahir, founder of digital tax platform Taxd explained that despite class 2 national insurance being abolished for the self-employed, HMRC's systems still incorrectly mark it as payable.

He emphasised that revenue officials have full knowledge of the problem but have failed to implement solutions.

"This isn't just an administrative error; it's a major flaw that is actively blocking people from buying homes. The taxman is fully aware of this blunder but is yet to take action, and the consequences are real," Shahir told The i Paper.

The malfunction has left countless self-employed individuals unable to relocate, purchase properties or restructure their existing home loans.

Shahir continued: "For a mortgage application to be approved, a lender needs a perfect match between an applicant's tax calculation and their HMRC account to prove earnings.

"Because of this digital glitch, that match is often impossible. What should be a straightforward sign-off becomes a complete standstill."

The mismatch in tax records is turning simple mortgage applications into major obstacles, especially with high interest rates and limited housing supply.

Some lenders now accept letters from accountants as a workaround, but this approach remains inconsistent across the industry.

"In an already challenging property market, this adds an unacceptable and unnecessary barrier," Shahir stated.

He noted that whilst certain lenders might consider letters from accountants clarifying the discrepancy, this creates additional complications that should not exist.

"While some lenders might accept a letter from an accountant as explanation, that's an inconsistent and added burden that shouldn't exist. This also leads accountants to waste countless, non-billable hours trying to fix the problem," he said.

Tax professionals report spending extensive unpaid time attempting to resolve these technical inconsistencies for clients desperate to proceed with property transactions.

The problems go beyond National Insurance errors, with tax experts warning that HMRC has also failed to update its systems to reflect the rise in capital gains tax from 20 to 24 per cent adding to confusion and the risk of incorrect bills.

"This is more than a technical problem; it's a fundamental failure of our tax system that is directly impacting people's financial lives and preventing them from getting on the property ladder," Shahir warned.

Although HMRC acknowledged awareness of the Class 2 contributions issue several months ago, no timeline for resolution has been provided.

Tax experts are pressing Treasury officials to treat the matter urgently and demanding comprehensive modernisation of HMRC's digital infrastructure to prevent similar disruptions.

An HMRC spokesperson confirmed they are "working to resolve an issue with Class 2 contributions" and apologised to affected individuals, promising notification once records are corrected.