Around 3.2 million pensioners are set to receive repayments after an HMRC calculation error. The refunds total an estimated £19.3 million, averaging approximately £6 per person, although individual amounts will vary.
Why the error occurred
Each year, state pensioners receive one week’s payments at the previous year’s rate and 51 weeks at the new, higher rate. But HMRC errantly taxed pensioners as if they were paid at the higher rate for 52 weeks.
Andy Wood from Tax Barrister UK said: “The difference between the two calculations might appear small, but accuracy matters. Pensioners should be able to trust that the income figure used to work out their tax is correct.
“The headline total should also be put into context. This is a correction of tax overpaid, so individuals should not assume they are all entitled to the same amount.”
How repayments will be made
Repayments will be processed automatically through PAYE adjustments, self assessment credits or other payment methods where appropriate. HMRC’s correction exercise covers affected cases from the 2020/21 tax year onwards.
Individuals can request a review of earlier tax periods, but they need more clarity, said Mr Wood. “HMRC needs to make the boundaries of this exercise clear, including what evidence it would consider for an earlier period.
“That would help pensioners understand what has been resolved and where further questions may remain.”
Earlier years not included automatically
The automatic exercise does not extend to years before 2020/21. According to the reporting, HMRC does not hold sufficient data to correct those cases automatically, although people who believe they were affected earlier can request an individual review with supporting evidence.
In a letter to MPs on the Treasury Select Committee, HMRC permanent secretary John-Paul Marks said: “I am sorry that this error occurred and recognise the impact on affected customers.
“We will also conclude an Internal Audit review, ensuring the lessons are identified and applied in future.”
