HMRC has apologised for a State Pension tax error dating back to 2010, telling the House of Commons Public Accounts Committee that an incorrect pension figure has been used in some tax calculations for years.
Up to an estimated 3.1 million pensioners may have overpaid tax in the 2024 to 2025 tax year alone, though HMRC says the typical amounts involved are only a few pounds a year.
- Up to 3.1 million pensioners potentially affected in 2024 to 2025 — around 1.4 million through PAYE, up to 955,000 in Self Assessment and around 760,000 in Simple Assessment, all treated by HMRC as upper-limit estimates
- Average overpayment for basic-rate taxpayers: £1.76 a year on the full basic State Pension, £2.30 on the full new State Pension, and roughly double that for higher-rate taxpayers
- Many smaller discrepancies were never actually collected or repaid, because they fall within HMRC’s administrative tolerances
- A fix is due by summer 2026, correcting 2025 to 2026 tax calculations and letting already-filed Self Assessment returns for that year be amended
How the State Pension tax error happened
The State Pension is taxed on an accruals basis, meaning tax is due on what a pensioner was entitled to receive over a tax year, not simply on the payments that landed in their account.
Because the State Pension is uprated every April, HMRC’s correct method treats one week of a tax year as paid at the previous year’s rate and the remaining 51 weeks at the new, higher rate.
According to HMRC’s own account of the error, some of its systems have instead applied the new rate across all 52 weeks, overstating the taxable amount and, for many pensioners, overstating their tax bill.
The fault traces back to a change made to HMRC’s PAYE systems in 2010 that did not fully implement the correct calculation method.
An incorrect figure has been used in some PAYE end-of-year reconciliations since the 2010 to 2011 tax year, and the same wrong figure has fed through into Self Assessment pre-population since 2015 to 2016 and Simple Assessment calculations since 2016 to 2017.
The scale of the problem, and why it isn’t a big-refund story
HMRC’s letter to the committee sets out year-by-year figures showing how the number of pensioners affected has grown as more people have been drawn into paying tax. The number of PAYE pensioners affected each year rose from around 720,000 in 2021 to 2022 to about 1.4 million in 2024 to 2025, HMRC’s figures show.
However, HMRC has stressed that a discrepancy in the underlying calculation does not always mean a pensioner actually paid the wrong amount of tax overall.
HMRC operates longstanding administrative tolerances under which very small overpayments are not automatically repaid and small underpayments are not pursued.
In 2024 to 2025 alone, around 4.76 million pensioners’ reconciliation outcomes fell within these tolerances: HMRC did not collect small underpayments from about 4.65 million pensioners who owed less than £49.99, nor automatically repay roughly 118,000 who were owed less than £9.99.
For basic-rate taxpayers, HMRC estimates the average amount overpaid in any one tax year between 2021 to 2022 and 2024 to 2025 was £1.76 for those on the full basic State Pension and £2.30 for those on the full new State Pension.
Higher-rate taxpayers lost roughly double that, around £3.50 to £4.60 a year over the same period, based on HMRC’s own underlying figures.
HMRC’s response and the fix
HMRC’s First Permanent Secretary and Chief Executive, John-Paul Marks, wrote to the Public Accounts Committee on 1 July 2026 to disclose the error and set out how the department is responding.
He told the committee that reaching a solution had taken this long given how tangled DWP’s State Pension data, PAYE reconciliation, Simple Assessment and Self Assessment pre-population are with one another, adding:
“I apologise for this error and especially to those pensioners who have been affected.”
Marks said HMRC would deliver a fix this summer to correct future tax calculations.
It is intended to apply correct calculations to the 2025 to 2026 tax year for pensioners in PAYE and Simple Assessment, and to let HMRC correct Self Assessment returns already filed for that year.
He said HMRC would consider individual cases of overpaid tax in line with its established processes, with extra support prioritised for vulnerable and digitally excluded customers, and has commissioned an internal audit into the causes of the error while asking the Low Incomes Tax Reform Group to help design and deliver the fix.
If you’re a pensioner and want to know whether this affects you, here’s what to check.
What you should do
- Compare your State Pension figure. Check the amount shown on any P800 tax calculation, PA302 Simple Assessment letter or pre-populated Self Assessment return against your DWP State Pension award letter and bank statements.
- Remember entitlement isn’t the same as payments received. HMRC should use your entitlement for the full 52-week tax year at the correct blended rate, not simply the payments that reached your account. The State Pension is paid four-weekly, so payment dates don’t map neatly onto tax years.
- Contact HMRC if something looks wrong. It can review your case and confirm whether a repayment is due, or you can amend a filed Self Assessment return yourself.
- Get free help if you need it. TaxAid, which now incorporates the former Tax Help for Older People charity, and HMRC’s Extra Support Team both offer free assistance. If you’d rather a professional checked your position and dealt with HMRC on your behalf, Tax Rebate Services can review your calculations for you.
- Watch out for scams. HMRC contacts pensioners about this by post, not by text or email with a refund link, and you never need to pay anyone simply to check or claim. GOV.UK’s guidance on tax overpayments and underpayments explains how the genuine process works.
With the Personal Allowance frozen at £12,570 until April 2031, and the full new State Pension now worth just over £12,547 a year — only around £22 below that threshold — more pensioners than ever are being pulled into paying tax on modest additional income.
That makes it worth checking your figures are right. Our guide to how tax works on the State Pension explains the rules in more detail.
Key Takeaways
- HMRC has apologised for a State Pension tax calculation error dating back to 2010, caused by systems using the wrong weekly rate at the start of each tax year
- Up to an estimated 3.1 million pensioners may have been affected in 2024 to 2025 alone, though HMRC’s figures are upper-limit estimates and the true number is likely lower
- Typical overpayments are small — a few pounds a year for most taxpayers — and many fell within HMRC’s tolerances, so no money changed hands either way
- HMRC has promised a fix by summer 2026, correcting 2025 to 2026 calculations and allowing already-filed Self Assessment returns to be amended
- Check your State Pension figure against your DWP award letter and contact HMRC if it looks wrong; free help is available from TaxAid and HMRC’s Extra Support Team
- Be alert to scams: HMRC never asks for a refund claim by text or email, and you don’t need to pay anyone to check or claim
Written by:
Tax Rebate Services Editorial Team
Reviewed by:
Tony Shanks
,
qualified Taxation Technician (ATT)
Last updated:
This article provides general information and is correct as at the date shown. It isn't personalised tax advice — for help with your own circumstances, speak to a qualified adviser or HMRC.
