An error by HM Revenue and Customs (HMRC) has led to overcharging of UK pensioners, with an estimated 8.7 million people affected. Officials have acknowledged the mistake, warning that individuals have paid an average of £5 more in tax than necessary. This could mean as much as £43.5 million was collected incorrectly last year.
Triple Lock Miscalculation
The government is aiming to roll out a fix later this summer. The error occurred because officials did not account for the yearly increase in the state pension under the triple lock. In the 2025/26 tax year, the new state pension was £230.25 per week, up from £221.20 in 2024/25.
As a result, state pension income was recorded as £9.05 higher than it should have been, leading to an additional tax of £1.81 for basic-rate taxpayers, £3.62 for higher-rate taxpayers, and £4 for additional-rate taxpayers.
Impact on Taxpayers
The error affected pensioners who pay income tax via self-assessment, as well as those still employed who pay through Pay As You Earn (PAYE). An HMRC spokesperson apologized, stating: “We apologise to those affected by this error and are working at pace to fix the issue, although the impact is small with the difference in tax owed being around £5 in most cases.”
Sir Mel Stride commented to The Sunday Times: “If HMRC have been charging millions of pensioners too much tax then questions need to be answered and the matter must be urgently put right. Ministers need to ascertain what has happened and what action is being taken to ensure these sorts of errors do not happen again.”
Government Guidance
Government guidance explains that if your income exceeds your Personal Allowance, HMRC will send a Simple Assessment tax bill detailing the amount owed and payment instructions. After the first year of receiving the State Pension, tax is calculated based on 52 weeks of payments annually. If your income is below your Personal Allowance, you typically do not need to pay tax.
The guidance adds: “Your employer will usually take any tax you owe off your earnings, including any tax you owe on your pension. If you’re self-employed you must fill in a Self Assessment tax return at the end of the tax year. You must declare your overall income, including the State Pension and money from private pensions, for example your workplace pension.”
For other income, Brits must inform HMRC about any earnings not from an employer or pension. The government states: “You might have to fill in a Self Assessment tax return to report this. If you owe any tax on investment income, HMRC will send you a calculation telling you how much you owe and how to pay it.”
