Hmrc Pension Tax Error Could Leave 8.7 Million Owed About £5 Each
Up to 8.7 million pensioners may have paid too much income tax after an hmrc pension tax error tied to state pension calculations. HMRC now says it is trying to work out how many people were affected and hopes to resolve the issue this summer.
Records show those affected paid about £5 extra each on average, and HMRC says the difference in tax owed is around £5 in most cases. The department is not issuing automatic refunds at present.
Richard Holden Flags HMRC Error
Richard Holden, the Tory MP, flagged the issue in August last year. It was not officially reported to the Department for Work and Pensions until October, and HMRC says the error went undetected for about 10 months.
HMRC spokesperson said: “We apologise to those affected by this calculation error and are working to fix the issue, although the impact is small with the difference in tax owed being around £5 in most cases.” The department is now trying to identify how many pensioners were caught up in the mistake.
State Pension Calculation Rules
The state pension is paid gross, but recipients still have to pay income tax on it. HMRC guidance says the amount owed should be calculated using 51 weeks of the current tax year’s pension rate and one week of the previous year.
HMRC instead calculates income using 52 weeks of state pension payments at the higher rate using DWP data. The new state pension for 2025/26 is £230.25 a week, up from £221.20 in 2024/25, which meant income would have been recorded as £9.05 a week higher than it actually was after the new rate was introduced.
Sir Mel Stride On Refunds
Sir Mel Stride said: “If HMRC have been charging millions of pensioners too much tax then questions need to be answered, and the matter must be urgently put right.” He also said: “Ministers need to ascertain what has happened and what action is being taken to ensure these sorts of errors do not happen again.”
Dan Tomlinson previously said “most pensioners pay the right amount of tax in real time.” For pensioners who may have overpaid, the immediate issue is whether HMRC’s review leads to a refund process before the summer deadline the department is aiming for.
