Prime Minister Gordon Brown has said he "profoundly regrets" the loss of 25 million child benefit records.
Two discs containing the details of 25 million people have been lost
He told MPs he apologised for the "inconvenience" caused and said the government was working to prevent the data being used for fraud.
BBC personal finance reporter Jennifer Clarke answers your questions about the data breach.
Jane from Llandudno asks whether she can find out if her name was included in the lost data.
The discs in question were lost on 18 October. They contained a snapshot of the complete child benefit database at or slightly before that point.
If Jane is currently receiving child benefit then her details, and those of her children, will be on the discs.
HMRC will be writing to all affected customers to apologise.
Tania from Kent asks exactly what information has been lost.
The discs contained 25 million records. These included the names, addresses, dates of birth, National Insurance numbers and, where relevant, bank and building society details of:
- 7.25 million claimants
- 15.5 million children, including some who no longer qualify but whose family is claiming for a younger child
- 2.25 million 'alternative payees' such as partners or carers
- 3,000 'appointees' who claim the benefit under court instructions
- 12,500 agents who claim the benefit on behalf of a third party
Geoff from Bolton and EP from Cardiff no longer receive child benefit, and want to know whether their details have been lost.
No - the discs only contained details of families currently receiving child benefit. However, as above, the discs could contain details of children who are no longer eligible for the payment if their parents are claiming for a younger child.
Doreen from Stockport asks if her child benefit will still be paid through her post office card account?
HMRC has confirmed child benefit will continue to be paid in the normal way. Customers who have any queries about receiving their benefit should contact the special helpline on 0845 302 1444.
Carol from Newbury asks whether child tax credits are also involved.
The discs did not contain information about child tax credit payments, and therefore these payments will not be affected.
However, any parent who gets tax credits will also be in receipt of child benefit and therefore their details will be amongst those compromised. Customers with queries about tax credits should contact the normal helpline on 0845 300 3900.
Julia from Braintree wants to know what is being done to get the information back.
HMRC believes the data is still on government property. The police are now conducting a search to find the discs. The government has stressed there is no evidence that they are in the possession of anyone else.
There is also likely to be a separate inquiry from the Independent Police Complaints Commission, which monitors the HMRC.
The Information Commissioner Richard Thomas has also announced he will investigate what has happened.
The chancellor has asked Kieran Poynter, chairman of PricewaterhouseCoopers, to carry out an independent review of HMRC's data handling procedures.
In the meantime HMRC has introduced new security arrangements to stop such a data loss happening again.
Ian from Liverpool asks what has happened to the person who downloaded the data.
In his statement to MPs, Chancellor Alistair Darling said that a "junior official" within HMRC had downloaded the database and sent it to the National Audit Office (NAO).
HMRC will not comment on what action, if any, has been taken against the official or whether he or she still works for the department.
The HMRC chairman Paul Gray resigned yesterday in recognition of the department's "substantial operational failure".
Tom from Buckinghamshire asks why the information sent to the NAO contained bank details.
The NAO requested data from HMRC as part of its preparations for the 2007-08 audit. According to the NAO itself, the data it requested was restricted to the child benefit number, the recipient's National Insurance number and their name.
This would enable the NAO to confirm the completeness and accuracy of a sample of child benefit payments.
It is not clear why the junior official supplied the entire database.
Mike from Liverpool welcomes the chancellor's statement that anyone who suffers from this error will not be out of pocket. But he asks how straightforward would any recovery process be?
HMRC and the banks have reiterated that there is no evidence of any fraud as a result of this data breach.
However, should fraud occur, the banking code guarantees that any "innocent victim" will not suffer any financial loss as a consequence.