HMRC Admitted Overtaxing Millions of State Pensioners Since 2010

Last reviewed: 10 July 2026.

HMRC has confirmed that some systems calculated taxable State Pension income using 52 weeks at the higher, uprated rate instead of, for most pensioners, one week at the previous rate and 51 weeks at the new rate.

The problem potentially affected:

• PAYE reconciliations from the 2010–11 tax year;
• State Pension figures pre-populated into HMRC online Self Assessment returns from 2015–16; and
• Simple Assessment calculations from 2016–17.

For 2024–25, approximately 1.409 million PAYE pensioners are confirmed by HMRC as having paid too much tax. Up to 955,000 Self Assessment users and approximately 757,000 Simple Assessment users may also have been affected, although HMRC says the actual numbers in those categories will be lower.

For the full technical explanation, affected tax-processing routes and HMRC’s planned corrective action, readers can read HMRC’s letter to the House of Commons Public Accounts Committee.

HMRC State Pension tax error: key facts

Issue	Confirmed position
Error identified	Incorrect taxable State Pension figures were used in parts of HMRC’s systems
Original system change	Introduced in 2010
PAYE period potentially affected	From 2010–11
Online Self Assessment period potentially affected	From 2015–16
Simple Assessment period potentially affected	From 2016–17
PAYE pensioners who overpaid in 2024–25	Approximately 1.409 million
Self Assessment cases potentially affected in 2024–25	Up to 955,000
Simple Assessment cases potentially affected in 2024–25	Approximately 757,000
Average annual overpayment for a basic-rate taxpayer receiving the full basic State Pension, 2021–22 to 2024–25	£1.76
Average annual overpayment for a basic-rate taxpayer receiving the full new State Pension, 2021–22 to 2024–25	£2.30
HMRC’s planned response	A system solution during summer 2026, revised guidance and an internal audit

The published figures distinguish between confirmed PAYE overpayments and people who may have overpaid through Self Assessment or Simple Assessment. HMRC has also stressed that administrative tolerances prevented many very small discrepancies from changing the amount ultimately collected or repaid.

What Did HMRC Admit About Overtaxing Pensioners?

In a letter dated 1 July 2026, HMRC chief executive and First Permanent Secretary John-Paul Marks informed the Public Accounts Committee that an incorrect State Pension amount had been used in PAYE end-of-year reconciliations, Self Assessment pre-population and Simple Assessment calculations.

He said:

“I apologise for this error and especially to those pensioners who have been affected.”

HMRC’s analysis found that around 1.4 million pensioners using PAYE paid too much tax because of the problem in 2024–25. The authority separately identified up to 955,000 potentially affected Self Assessment cases and around 760,000 potentially affected Simple Assessment cases.

The mistake did not reduce anyone’s State Pension entitlement. It concerned the pension income figure used to calculate Income Tax.

How Did the State Pension Tax Calculation Error Happen?

The State Pension normally increases each April. Under the triple lock, the basic and new State Pension rates generally rise by the highest of average earnings growth, Consumer Prices Index inflation or 2.5%. The principal State Pension rates increased by 4.8% in April 2026.

For tax purposes, State Pension is assessed according to the amount a person was entitled to receive during the tax year, rather than simply adding up the payments that reached a bank account.

For most pensioners, the annual taxable amount should be calculated as:

One week at the previous year’s rate + 51 weeks at the current year’s uprated rate

Parts of HMRC’s systems instead used:

52 weeks at the current year’s uprated rate

That produced a slightly higher taxable State Pension figure. The additional tax was generally the person’s marginal tax rate applied to the difference between one week at the old rate and one week at the new rate.

Why is One Week Normally Calculated at the Old Rate?

The UK tax year starts on 6 April, but the uprated State Pension does not necessarily apply from the first day of the tax year. Payment dates and entitlement rules can mean that one week belongs at the previous rate.

HMRC’s Self Assessment guidance therefore instructs most pensioners to calculate their entitlement using one week at the old weekly rate and 51 weeks at the new rate.

Does the 51-week Calculation Apply to Every Pensioner?

No. There are exceptions, particularly for some people who reached State Pension age before 6 April 2010.

HMRC’s PAYE manual says the correct calculation for those pensioners can depend on the day of the week on which 6 April falls. In some years, 52 weeks at the new rate is correct for this group.

This distinction is important. A person should not assume that a 52-week calculation is wrong without checking the applicable rules, pension commencement date and tax year.

How Many State Pension Recipients Were Affected?

HMRC’s detailed published analysis currently concentrates on the four tax years from 2021–22 to 2024–25.

Tax year	Confirmed PAYE cases	Potential Self Assessment cases	Potential Simple Assessment cases
2021–22	720,000	Up to 784,000	Up to 167,000
2022–23	762,000	Up to 806,000	Up to 235,000
2023–24	1,167,000	Up to 887,000	Up to 554,000
2024–25	1,409,000	Up to 955,000	Up to 757,000

The Self Assessment figures are upper limits because taxpayers using third-party software did not receive HMRC’s pre-populated figure. Some people using HMRC’s online return may also have replaced the incorrect figure with the correct amount.

The Simple Assessment estimate is also an upper limit because not every calculated balance was necessarily collected.

Were 3.1 Million Pensioners Definitely Overtaxed in 2024–25?

No. Approximately 3.1 million represents the combined number confirmed or potentially affected across PAYE, Self Assessment and Simple Assessment.

The strongest confirmed figure is the approximately 1.409 million PAYE pensioners whom HMRC says paid too much tax. The remaining Self Assessment and Simple Assessment figures describe cases where the wrong pension amount may have caused an overpayment.

That distinction should be retained in headlines, summaries and financial guidance.

How Much Tax Did Individual Pensioners Overpay?

HMRC estimates that, for a basic-rate taxpayer, the average annual loss between 2021–22 and 2024–25 was:

• £1.76 for someone receiving the full basic State Pension; and
• £2.30 for someone receiving the full new State Pension.

These are averages across several years, not guaranteed refund amounts. An individual figure can differ according to the tax year, State Pension entitlement, additional pension amounts, other taxable income and marginal tax rate.

Practical Example of the Calculation

HMRC’s table shows that the new State Pension weekly rate rose by £17.35 for 2024–25.

Using the wrong rate for one additional week would therefore overstate taxable pension income by £17.35. For someone paying Income Tax at 20%, the potential additional tax would be:

£17.35 × 20% = £3.47

For the full basic State Pension, the corresponding 2024–25 weekly difference was £13.30, producing potential additional basic-rate tax of £2.66.

Although these individual sums appear modest, they become material when repeated across large numbers of pensioners and several tax years.

Did the Mistake Generate £18 Million for HMRC?

The Times reported that HMRC’s internal estimates placed the potential total generated by the error at approximately £18 million since 2021.

That figure does not appear as a separate total in HMRC’s published 1 July letter. It should therefore be attributed to the newspaper’s reporting rather than presented as a fully itemised total in the public correspondence.

HMRC has also explained that detailed historical analysis is difficult because of the volume of records, the length of time involved and its data-retention policies.

Who is Most Likely to Have Been Affected?

A pensioner was more likely to experience a financial impact where all the following applied:

• State Pension income was included incorrectly in an affected HMRC calculation;
• total taxable income was high enough for Income Tax to be due;
• the incorrect amount was not manually corrected;
• the resulting balance was collected rather than falling within an administrative tolerance; and
• the person used PAYE, HMRC’s online Self Assessment pre-population or Simple Assessment during an affected tax year.

People with a workplace pension, private pension, employment income, self-employment income, savings income or other taxable income may be more likely to exceed their available tax-free allowances.

The State Pension itself is normally paid without tax being deducted. Where a pensioner also receives a private or workplace pension, HMRC will usually arrange for the pension provider to collect tax owed on the State Pension through PAYE. Where State Pension is the only income and tax is due, HMRC may issue a Simple Assessment bill.

Retired company directors, business owners continuing to receive remuneration, sole traders and pensioners working part-time should therefore check the State Pension figure alongside their other taxable income.

How Can Pensioners Check Whether Too Much Tax Was Paid?

A discrepancy should be checked against records for each relevant tax year rather than estimated from a current weekly pension rate.

1. Find the State Pension Uprating Information

The Pension Service normally issues a letter explaining the annual increase in State Pension. HMRC’s tax-return notes refer to this as the “About the general increase in benefits” letter.

The letter should show the individual weekly State Pension entitlement before and after the annual increase.

2. Calculate the Taxable Entitlement Carefully

For most pensioners who reached State Pension age on or after 6 April 2010, the calculation will generally be:

• Previous weekly rate × 1
  Plus new weekly rate × 51

Different rules can apply where State Pension began during the year, the entitlement changed, the pension was deferred or the individual reached State Pension age before 6 April 2010.

3. Compare the Figure with the HMRC Calculation

The taxable State Pension amount may appear in:

• A P800 end-of-year PAYE calculation
• A Simple Assessment letter
• The State Pension section of a Self Assessment return
• An HMRC tax calculation
• The individual’s Personal Tax Account.

The figure should be compared with the correctly calculated State Pension entitlement for that specific year.

4. Check Whether the Discrepancy Changed the Tax Paid

An incorrect pension figure does not necessarily prove that money was lost.

HMRC’s operational tolerances mean that some small repayments are not issued automatically and some small underpayments are not pursued. In 2024–25, HMRC said it did not automatically issue repayments below £9.99 to approximately 118,000 pensioners, while underpayments below £49.99 were not collected from approximately 4.65 million pensioners.

5. Contact HMRC with the Relevant Evidence

HMRC has said that concerned customers can use its PAYE or Self Assessment contact channels, write to the authority or amend a Self Assessment return where permitted.

Useful records may include:

• the DWP annual uprating letter;
• the relevant P800 or Simple Assessment calculation;
• copies of Self Assessment returns;
• P60 certificates from pension providers or employers; and
• a written calculation showing the old and new weekly pension rates.

The official HMRC Income Tax enquiries service covers tax codes, P800 calculations and overpayments. Extra support is available for people whose health, disability or personal circumstances make dealing with HMRC difficult.

Can an old Self Assessment return be amended?

A Self Assessment return can normally be amended within 12 months of its filing deadline. The person’s tax calculation will then be updated, potentially producing additional tax to pay or a refund.

Older tax years can involve different statutory claim procedures and deadlines. Because HMRC has acknowledged a system-wide historical error, affected taxpayers should follow the specific guidance HMRC publishes rather than assuming that an ordinary online amendment is the only available route.

HMRC’s 1 July letter says it will consider individual cases under established procedures. It has not yet announced a single blanket historical refund process covering every affected year.

Will HMRC Issue Automatic Refunds?

A universal automatic refund programme had not been confirmed as of 10 July 2026.

HMRC has committed to delivering a system solution during summer 2026. According to its letter, the work is intended to:

• prevent the error from recurring;
• apply the correct calculation to PAYE and Simple Assessment for 2025–26; and
• enable HMRC to correct 2025–26 Self Assessment returns already filed.

HMRC is also updating customer guidance and considering what additional support can be provided within the legal framework and operational constraints.

The authority has commissioned an internal audit to establish the full history and causes of the problem. Its chief executive is expected to update the Public Accounts Committee after the fix is implemented and when the audit conclusions become available later in 2026.

Why did HMRC Take so Long to Address the Problem?

The system defect originated in a PAYE change introduced in 2010, when HMRC says the full requirements for calculating taxable State Pension income were not implemented.

The incorrect figure subsequently fed into:

• PAYE end-of-year reconciliations from 2010–11
• HMRC online Self Assessment pre-population from 2015–16
• Simple Assessment calculations from 2016–17.

HMRC attributed the delay in developing a solution to the interaction between DWP State Pension information, PAYE reconciliation, Simple Assessment and Self Assessment systems.

The Times reported that HMRC had known about the issue since at least 2019. HMRC’s published letter does not provide a complete chronology; its internal audit is intended to establish that history and identify why the problem was not escalated sooner.

Final Takeaway

HMRC has formally acknowledged a long-running State Pension tax-calculation error originating from a PAYE system change introduced in 2010.

The clearest confirmed impact is that approximately 1.4 million PAYE pensioners paid too much tax in 2024–25. A further 1.7 million Self Assessment and Simple Assessment cases may have been affected, but those estimates do not establish that every person involved suffered a cash loss.

Individual overpayments were usually small, but the issue matters because it continued for years, affected millions of calculations and involved taxpayers who may rely on fixed or limited retirement incomes.

Pensioners should retain their DWP uprating letters and HMRC calculations, compare the taxable State Pension figure carefully and use official HMRC contact routes where a genuine discrepancy appears. Further action may depend on the revised customer guidance and system correction that HMRC has promised for summer 2026.

FAQs

Has HMRC admitted overtaxing State Pension recipients since 2010?

Yes. HMRC has confirmed that a PAYE system change introduced in 2010 led to incorrect taxable State Pension figures being used in some calculations from the 2010–11 tax year onwards. Self Assessment pre-population was affected from 2015–16 and Simple Assessment from 2016–17.

How many pensioners paid too much tax?

HMRC estimates that around 1.409 million PAYE pensioners paid too much tax in 2024–25. Up to 955,000 Self Assessment users and around 757,000 Simple Assessment users may also have overpaid, but those two figures are upper estimates.

How much could an affected pensioner receive?

No standard refund amount has been announced. HMRC estimates an average annual basic-rate loss of £1.76 for the full basic State Pension and £2.30 for the full new State Pension across 2021–22 to 2024–25. The actual figure depends on the individual calculation and tax rate.

Does a pensioner need to make a refund claim?

HMRC has not yet announced a universal historical repayment process. It currently advises people who believe they overpaid to contact HMRC, write about their circumstances or amend a Self Assessment return where possible.

Which document shows the State Pension amount used for tax?

The amount may appear on a P800, Simple Assessment, Self Assessment return or other HMRC calculation. The correct entitlement can be checked using the annual uprating letter issued by the Pension Service.

Is the State Pension taxable?

Yes. The State Pension counts as taxable income, although many recipients pay no tax because their total taxable income remains within available allowances. Tax due on State Pension may be collected through a private pension or employment PAYE code, through Self Assessment or by Simple Assessment.

Is this connected to underpaid State Pensions?

No. This particular issue concerns Income Tax calculations made by HMRC. It is separate from DWP exercises involving State Pension entitlement or historical underpayments.

When will HMRC fix the problem?

HMRC said it would deliver a solution during summer 2026. As of 10 July 2026, the published correspondence had not provided a precise implementation date or confirmed that the work was complete.

Important Note:

Editorial Note: This article has been reviewed against official HMRC, GOV.UK and House of Commons Public Accounts Committee guidance.

Disclaimer

This article provides general information about a confirmed HMRC tax-calculation issue. It does not constitute personalised tax, legal, pension or financial advice. Tax outcomes depend on individual income, allowances, pension entitlement, residence and the relevant tax year. Anyone uncertain about a calculation should contact HMRC or consult a suitably qualified tax adviser.