Thousands of Self-Employed Workers Blocked from Mortgages by HMRC Glitch

A technical glitch at Her Majesty’s Revenue and Customs (HMRC) is preventing thousands of self-employed individuals in the UK from obtaining mortgages. Despite the abolishment of class 2 National Insurance Contributions (NICs) for self-employed workers effective April 6, 2024, HMRC systems continue to erroneously indicate that these payments are still required.

Eamon Shahir, founder of the digital tax platform Taxd, highlighted the issue in a statement to The i Paper. He expressed concern that this situation is not merely an administrative oversight but a significant flaw that is hindering many from purchasing homes. “The taxman is fully aware of this blunder but is yet to take action, and the consequences are real,” Shahir stated.

The mortgage application process requires a precise alignment between an applicant’s tax calculations and their HMRC account to verify earnings. According to Shahir, the glitch complicates this verification. “What should be a straightforward sign-off becomes a complete standstill,” he explained, noting that many applicants are facing undue delays in securing their loans.

An official spokesperson for HMRC acknowledged the issue, stating, “We’re working to resolve an issue with class 2 contributions. We apologise to those affected, and we’ll be letting them know once their records are corrected.” The spokesperson also indicated that customers who include capital gains in their 2024-25 tax returns can utilize an online calculator to adjust for the mid-year rate change.

Starting from April 6, 2024, self-employed taxpayers will no longer be obligated to pay class 2 NICs. Nevertheless, there may be circumstances where individuals opt to pay these contributions voluntarily. Class 4 NICs, on the other hand, are calculated based on profits from self-employment that exceed a specific threshold. Additionally, married women or widows who qualify for reduced-rate contributions are not required to pay class 2 NICs.

As this situation continues to unfold, many self-employed individuals are left navigating a challenging landscape. The combination of HMRC’s technical errors and the complexities of the tax system underscores the urgent need for a resolution to prevent further financial strain on those seeking to secure home loans.