HMRC complaints hit five-year high as compensation payments rise 35%

Complaints made by taxpayers to HM Revenue & Customs have risen to their highest level in five years, with the proportion of cases leading to compensation also reaching a recent high.

New figures obtained under the Freedom of Information Act by the Tax Controversy Group show that HMRC received 93,589 complaints in the 2024/25 tax year, up from 78,542 in 2020/21, an increase of 19.2 per cent over five years.

The data suggests growing frustration among taxpayers and advisers at a time when the tax authority has faced steady criticism about service levels, processing delays and limited access to support.

The rise in complaints follows repeated warnings from watchdogs about falling performance standards at HMRC. In January 2025, the Public Accounts Committee said telephone response times, often seen as a measure of service quality, had continued to deteriorate from the lowest on record the previous year.

Professional advisors say operational errors, including incorrect tax code notifications, unused corrections and backlogged processing, increase the error and complaint cycle.

Andrew Park, a tax investigation partner at Price Bailey, spokesperson for the Constituent Tax Group, said this practice shows the growing stress on taxpayers.

“HMRC is being forced to accept that an increasing number of taxpayers are suffering from anxiety and depression as a result of action or inaction,” he said.

“Every year thousands of people lose money, waste time and unnecessary stress because HMRC are struggling to deliver the basics.”

The increase in complaints has been accompanied by a significant increase in compensation payments. The number of cases where HMRC paid for corrections increased by 35 per cent, from 11,333 in 2020/21 to 15,304 in 2024/25.

During that time, the number of complaints leading to compensation rose from 14.4 percent to 16.4 percent, the highest level in five years.

Most notable is the increase in payments directly linked to “anxiety and stress”, which reached almost 10,000 cases in the most recent year.

However, while more taxpayers are receiving compensation, the rate of payment has decreased. In 2024/25, the average maintenance fee stood at £125.27, the lowest rate over a five-year period.

“Most of the taxpayers complain just so that mistakes can be corrected,” he said. “However poor service standards can result in financial losses resulting in less compensation that HMRC is willing to offer.”

Tax experts argue that complaints about service levels cannot be easily separated from larger tax disputes. Errors in coding notices, delays in processing returns and system errors can directly lead to incorrect tax debts, and additional financial stress on individuals and businesses.

“Failure to work can be a major cause of tax errors that contribute to the increase in complaints,” said Park.

In many cases, taxpayers are forced to invest significant time, or receive payments, to resolve problems caused by administrative errors rather than disputes over tax law.

The Tax Opposition Group also highlighted concerns that HMRC’s continued push towards digitalisation could exacerbate the problem.

Tax authorities have increasingly encouraged taxpayers to use online systems and automated services, positioning digital transformation as a long-term solution to resource problems and operational challenges.

Critics, however, warn that traditional support channels are being reduced before digital alternatives become fully reliable.

“HMRC is pushing taxpayers to digital systems that aren’t ready yet, while withdrawing the human support they still need,” Park said. “This is a risky combination of operational difficulties and high-profile complaints.”

As HMRC prepares for further changes, including the extension of Tax Digitization Requirements to more groups of taxpayers, advisers fear that appeals rates could rise significantly if service capacity does not improve.

With around 94,000 complaints lodged in the past year alone and compensation rates at a five-year high, the figures underline the growing pressure on Britain’s tax authority to restore confidence in its service delivery.