HMRC Overcharges 8.7M Pensioners £5 Each on Income Tax, June 14

HMRC has admitted overcharging up to 8.7 million pensioners on income tax due to a calculation error spanning at least 10 months. The tax authority used incorrect state pension figures and failed to account for the triple lock increase, resulting in an estimated £43.5 million in excess revenue collected last year. The average overpayment is £5 per person, but the scale of the error has drawn criticism from MPs and pensions campaigners.

How the Error Happened

HMRC relied on figures from the Department for Work and Pensions that assumed pensioners received 52 weeks at the new, higher state pension rate. Official guidelines require calculating tax on 51 weeks at the current year’s rate and one week at the previous year’s rate, reflecting payment timing around the tax year start. For the 2025-26 tax year, the full new state pension rose from £221.20 a week to £230.25. This £9.05 weekly discrepancy overstated pension income and inflated tax bills across millions of accounts.

Who Is Affected and What They Should Do

The error affects both pensioners paying income tax through self-assessment and those paying via PAYE. Affected pensioners must apply directly to HMRC for a refund on the HMRC website or by phoning 0300 200 3300 weekdays from 8am to 6pm. HMRC acknowledged the problem after it was raised by Conservative MP Richard Holden last year and says it expects to fix the issue this summer.

Political Pressure and Wider Tax Concerns

Shadow Chancellor Sir Mel Stride said questions need to be answered and the matter must be urgently put right. Former pensions minister Sir Steve Webb called the mistake “remarkably careless” and “shocking.” The error compounds broader concerns about pensioner taxation, as Parliament debates a petition with 119,000 signatures calling for the personal allowance to be doubled for state pensioners. Critics argue that freezing the personal allowance while the state pension rises is dragging more older people into the tax system by stealth.

Final Thoughts

HMRC overcharged 8.7 million pensioners an average of £5 each due to a state pension calculation error. Refunds are expected this summer, but the mistake highlights ongoing concerns about how the tax system treats retirees as the personal allowance remains frozen.

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