HM Revenue & Customs has been overcharging pensioners on their tax bills for at least a decade after calculating state pension income incorrectly each year. The error affected up to 8.7 million pensioners and has already led to an average overcharge of £5. HM Revenue & Customs says it is working at pace to fix the issue later this summer.
Jim Harra and the error
Former HMRC chief executive Jim Harra was made aware of the problem two years ago. HMRC did not tell the public or try to issue refunds after starting a formal investigation, even though Older Britons had spotted errors on their tax bills as far back as 2016.
The flaw came from the way HMRC handled the state pension, which is paid gross but still subject to income tax. The pension rises each April under the triple lock, which gives the higher of 2.5 per cent, inflation or average earnings growth. HMRC guidance says liabilities should use 51 weeks of the current tax year's pension and one week of the previous year's lower rate, but HMRC used 52 weeks at the higher rate.
PAYE and self assessment
The mistake affected pensioners paying tax through self assessment and those still in employment who pay through PAYE. HMRC's records showed those affected paid £5 on average, while the error netted HMRC up to £43.5 million last year. The state pension rose to £230.20 a week for the 2025/26 tax year, up from £221.20 a week, a difference of £9.05 a week before tax.
That gap helps explain why small weekly miscalculations can build into larger bills over time. HMRC uses information provided by the Department for Work and Pensions rather than its own records, so the correction now depends on how quickly it can reconcile those figures and identify the pensioners it overcharged.
HMRC later this summer
HMRC is working to figure out how many people have been affected and has not yet informed those affected or issued automatic refunds. The open question now is which pensioners will get money back and whether HMRC will calculate repayments automatically or leave some people to check their own tax bills.
For pensioners who paid tax through PAYE or self assessment, the immediate practical step is to watch for a correction from HMRC later this summer and to review tax bills where the state pension was included at the wrong annual rate.
