HMRC apologises for pensioner tax overcharge of £43 million

HM Revenue and Customs has apologised for a calculation error that led to millions of pensioners being overcharged on their income tax, with the department potentially collecting tens of millions of pounds more than it was owed. The error, which was first flagged last year, means pensioners paid an average of approximately £5 extra in tax.

The issue stems from how HMRC's systems calculate taxable state pension income. The state pension rises each April under the triple lock. For the 2025-26 tax year, the full new state pension increased from £221.20 to £230.25 per week. According to HMRC's own guidance, the taxable amount should be calculated using one week at the old rate and 51 weeks at the new rate, reflecting the period between the start of the tax year and the first uprated payment. However, HMRC's software incorrectly prefilled pension income at 52 weeks of the new, higher rate in self-assessment returns. This overstated taxable income by £9.05 per week.

The department acknowledged the error affects pensioners who pay tax via self-assessment, as well as some whose tax is collected through Pay As You Earn (PAYE). While HMRC has not confirmed a final figure, reports suggest...