Hmrc State Pension Tax Error May Overcharge 8.7 Million Pensioners
HMRC state pension tax error may have left up to 8.7 million pensioners paying too much income tax. The department says the calculation issue went undetected for about 10 months and that it is now working to learn how many people were affected. HMRC is not issuing automatic refunds at present.
Richard Holden Flags October Report
Tory MP Richard Holden flagged the issue in August last year, before it was officially reported to the Department for Work and Pensions in October. HMRC hopes to resolve the issue this summer. The affected group is large enough to leave the department assessing refunds on a scale that could reach millions of people.
HMRC Pension Calculation Method
The state pension is paid gross, but recipients still have to pay income tax on it. HMRC guidance says pension tax should be calculated based on 51 weeks of the current tax year’s pension rate and one week of the previous year. HMRC calculates income using 52 weeks of state pension payments at the higher rate using DWP data.
For 2025/26, the new state pension is £230.25 a week, up from £221.20 in 2024/25. That gap meant income would have been recorded as £9.05 a week higher than it actually was, and records show those affected paid, on average, an extra £5 in tax. HMRC 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.”
Sir Mel Stride Response
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 added: “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.” HMRC is now looking to learn how many people are affected, while pensioners wait to see whether the department will correct the records without requiring individual claims.
