A computer error buried deep in HMRC’s system is leaving hardworking taxpayers locked out of the housing market.
Thousands of self-employed workers are finding their mortgage applications rejected through no fault of their own, with some fearing they could lose their homes.
The problem stems from changes to National Insurance made in April 2024, when Class 2 contributions were scrapped. Despite this, Government databases are still showing the charges as outstanding.
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This glitch means many people's documents don't align, even when their accounts are correct. This means that some home loans are being refused and remortgage deals blocked, trapping people on high rates while the housing market remains tight.
Mortgage lenders demand that borrowers' paperwork exactly matches HMRC records.
One of the people affected is Christian Gordine, a creative researcher and freelance filmmaker, who recently tried to buy a studio flat in Cambridge Heath, east London.
Although Barclays initially approved his mortgage, the deal was derailed when figures on his official tax forms clashed with those prepared by his accountant.
The deal was derailed when figures on his official tax forms clashed with those prepared by his accountant
|GETTY
"The issue became apparent when my broker noticed that my SA302 and tax overview didn't match the figures I had provided, based on documents prepared by my accountant," Mr Gordine told The i Paper.
His ordeal involved approximately eight hours of telephone conversations with revenue officials who proved unable to clarify the inconsistency. The bank demanded matching documentation, yet HMRC insisted on postal delivery of their versions, causing a fortnight's delay.
Mr Gordine's accountant eventually identified an extra NI charge that Government staff hadn't recognised as problematic.
The glitch comes from HMRC failing to update its computer systems after rule changes. Parliament scrapped Class 2 National Insurance for the self-employed last year, but Government records still show these payments as if they are owed.
HMRC guidance stated: 'Use the toilet appropriate to your new gender' | GETTYEamon Shahir, who established the digital tax platform Taxd, confirmed that revenue authorities know there's problem but haven't fixed the system.
"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," Mr Shahir stated.
The defect extends beyond National Insurance complications, as HMRC has additionally neglected to incorporate the capital gains tax increase from 20 to 24 per cent into their systems.
Mortgage providers operate under strict verification protocols that demand absolute consistency between submitted tax calculations and HMRC's official records. This requirement transforms minor database errors into insurmountable barriers for loan approval.
"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," Mr Shahir explained.
"Because of this digital glitch, that match is often impossible. What should be a straightforward sign-off becomes a complete standstill."
Pension crisis looms | GETTYTax professionals are urging the Treasury to step in, warning that self-employed workers nationwide are being caught up in the glitch. Accountants report spending long hours without pay trying to resolve discrepancies for clients whose property purchases are now at risk.
Mr Gordine said the problem highlights the need to modernise how self-employed income is assessed. "Many people are now working multiple jobs just to stay afloat, not even to live comfortably and yet the system isn't built to reflect that reality," he said.
A HMRC spokesperson apologised to affected individuals, stating that customers experiencing mortgage difficulties should contact their national insurance team for assistance, though only "a handful" have reportedly made contact.
They said: "We apologise to anyone affected by this issue. Any self-employed customer who thinks this is affecting a mortgage application should contact our national insurance team, so we can quickly resolve this for them. A handful of customers have contacted us about this and we've sent them updated tax calculations. We are unable to provide updated calculations via email for security reasons."