HMRC says a tax calculation error may have caused millions of state pensioners to pay too much income tax. Reports cite that up to 8.7 million pensioners were affected last year, with the overcharge estimated at around £5 per person on average. HMRC says the difference stems from how the income tax liability is calculated across pension payment periods when the state pension rate changes, and that its system used 52 weeks of state pension paid at the new rate rather than the approach intended to reflect the tax year timeline. HMRC has apologised to those affected and says it is working to correct the issue, aiming to resolve it later this summer. The department says it is assessing how many people were impacted and is not currently issuing automatic refunds. Instead, HMRC says individuals can contact it to have incorrect figures amended and receive any refund. Multiple outlets report concerns that the error was not detected for about 10 months, with political criticism about how quickly it was identified and escalated. Estimates in some coverage suggest HMRC collected an additional total of tens of millions of pounds, but HMRC is focused on identifying affected individuals and fixing the calculation.
HMRC says pensioners may have been overcharged due to state pension tax calculation error
HMRC says a tax calculation error may have caused millions of state pensioners to pay too much income tax. Reports cite that up to 8.7 million pensioners were affected last year, with the overcharge e...
- HMRC has acknowledged a state pension income tax calculation error affecting pensioners.
- Up to 8.7 million state pensioners are reported to be affected, with an average overcharge of about £5.
- The issue involves HMRC calculating tax using 52 weeks of the pension at the new rate rather than the guidance method accounting for the period between tax-year dates.
- HMRC says it is working to fix the problem later this summer and is not issuing automatic refunds yet.
- Affected individuals can contact HMRC to have tax figures corrected and request a refund.
HMRC has apologised to everyone impacted by the mistake
2 months agoMillions could be affected (Picture: Shutterstock / Ascannio) Up to 8.7million pensioners may have paid too much tax last year. HMRC pocketed millions more than it was meant to due to the error, which saw pensioners pay about £5 extra each. HMRC knows the error went undetected for about 10 months, prompting fears it could have been going on for years. According to the Sunday Times, the issue was flagged in August last year by Tory MP Richard Holden, but was not officially reported to the Department for Work and Pensions (DWP) until October. HMRC hopes to resolve the issue this summer. The department is now looking to learn how many people are affected, but it is not issuing automatic refunds at present. Sign up for all of the latest stories Start your day informed with Metro's News Updates newsletter or get Breaking News alerts the moment it happens. Affected pensioners are thought to be owed £5 on average (Picture: Shutterstock / Pixel-Shot) A 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.’ How did this happen? The state pension – which rises annually in April in line with the highest figure of inflation, average earnings or 2.5% – is paid gross, but recipients still have to pay income tax on it. According to HMRC guidance, the amount of tax a pensioner owes should be calculated based on 51 weeks of the current tax year’s pension rate and one week of the previous year, to account for the time between the start of the first tax year on April 5 and the first payment after that. But HMRC calculates income using 52 weeks of state pension payments at the higher rate using DWP data. HMRC has been called upon to fix the error (Picture: Shutterstock / fizkes) This means that after the new state pension for 2025/26 of £230.25 a week was instated – up from £221.20 in 2024/25 – income would have been recorded as £9.05 a week higher than it actually was. Records show those affected paid, on average, an extra £5 in tax. Critics have urged the department to reveal exactly how long the problem will take to fix. Sir Mel Stride, the shadow chancellor, 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. ‘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, the minister responsible for HMRC, previously said ‘most pensioners pay the right amount of tax in real time.’ But he added: ‘HMRC has become aware that for a subset of individuals in receipt of the state pension, a calculation error means that their tax is calculated based on 52 weeks at the new rate. ‘The difference in tax owed is approximately £5. Affected individuals can call HMRC to amend any incorrect figures of state pension.’ Those who have been affected should contact HMRC for a refund. They will continue to pay tax as normal. Comment now Comments Add Metro as a Preferred Source on Google Add as preferred source
2 months agoUp to 8.7million state pensioners have been affected, with HMRC estimated to have collected up to £43.5million last year
2 months agoHMRC has apologised for the error and hopes to fix the problem later this summer
2 months agoThe tax authority has admitted a calculation error
2 months ago
Lee Mack, Harry Hill and Katherine Ryan announced for Last One Laughing series 3
Prime Video announces the cast for the third series of “Last One Laughing,” with Lee Mack, Harry Hill and Katherine Ryan...
Notting Hill Carnival: 330 people banned as police launch major operation
Police enforce safety measures at London’s Notting Hill Carnival by banning 330 people from attending this year’s event,...
Netflix releases GTA 6 extended look with gameplay trailer; runtime and platform details emerge
Netflix is streaming an extended look at Grand Theft Auto VI, featuring roughly half an hour of gameplay footage and a l...