HMRC has confirmed it is taking action to correct Department for Work and Pensions (DWP) state pension taxation errors that have affected 3.2 million pensioners since the 2010-11 tax year.
The tax authority admitted that an incorrect figure was applied in end-of-year PAYE reconciliations. In its annual report, HMRC acknowledged that since 2010-11 the error had affected Self Assessment pre-population. The problem stretches back to 2015-16, and Simple Assessment since 2016-17.
The blunder resulted in a discrepancy between the correct State Pension figure for tax purposes and the figure actually used in the calculation, the tax authority confirmed.
Who is affected and how much is owed
HMRC estimates that around 1.4 million PAYE customers were overcharged on tax, along with up to 955,000 Self Assessment customers and approximately 760,000 Simple Assessment customers - totalling 3.2 million people affected across the UK.
Where an overcharge has occurred, it reflects the marginal rate of tax on the difference between one week of State Pension at the previous and uprated rates, HMRC explained. These state pensioners received an inaccurate State Pension figure and may therefore have paid more tax than necessary.
The HMRC report reveals that the average loss per tax year since 2021-22 for a basic rate taxpayer is estimated at £1.76 for those on the full basic State Pension, and £2.30 for those on the full new State Pension.
How to claim a refund
HMRC will proactively identify affected cases and make corrections through PAYE coding adjustments, credits to Self Assessment accounts or, where required, alternative methods such as payable orders.
Antonia Stokes, from the Low Incomes Tax Reform Group, said: "It is disappointing that HMRC data constraints prevent automated repayments further back, but it is positive that taxpayers can take steps to rectify earlier years if they identify they have been overcharged."
John-Paul Marks, HMRC's chief executive, said: "If customers believe they were affected in earlier years and have the necessary evidence, they can ask HMRC to review their position. These requests will be considered on a case-by-case basis."
