Bereaved individuals across the UK are facing a double financial blow from insurance companies and the tax authority, with some reporting unexplained premium hikes and severe income reductions due to automated system errors.
The HMRC Tax Code Shock
Dr Susan Treagus from Manchester experienced what she describes as an unforgivable system failure just weeks after her husband's death in March this year. After notifying HMRC through the Tell Us Once service, she received two tax code letters in April that appeared similar at first glance.
The reality emerged when Dr Treagus examined her bank statements in May and June, discovering her small occupational pension had almost halved. The shocking cause? HMRC's automated system had added an extra £62,000 to her pension income, pushing her into the higher tax threshold.
When she contacted HMRC, she learned the calculation was entirely computer-generated. The system had examined electronic transfers in and out of her accounts during February and March, then multiplied this figure by 12 to create an annual income calculation exceeding £100,000.
The Insurance 'Bereavement Premium'
Separately, another widowed individual reported facing what they termed a bereavement premium from their car insurance provider five years ago. After their wife died, the insurance company increased their car insurance costs significantly.
The policyholder found an unconventional solution that highlights the absurdity of insurance algorithms. By adding their son to the policy - despite him living 100 miles away and only visiting about three times per year - the premium was reduced to acceptable levels.
Systemic Failures and Lack of Accountability
Dr Treagus expressed deep concern about the lack of human oversight in HMRC's processes. Large electronic payments into her account during February and March, likely related to care home fees and funeral arrangements, were misinterpreted as regular income.
The tax code change arrived in a standard notification without any explanation, and correction required the bereaved individual to initiate contact. Dr Treagus noted that if she hadn't been educated and numerate, she might have faced incorrect taxation all year with no automatic review process.
This case raises serious questions about the increasing reliance on algorithms and artificial intelligence in sensitive areas like bereavement administration, where human understanding and common sense are crucial.
