HMRC has admitted a long-running error in the taxable State Pension figures used in some tax calculations, with the problem traced to a PAYE systems change introduced in 2010. The issue later fed into Self Assessment pre-populated information and Simple Assessment calculations.
For the 2024/25 tax year, around 1.4 million pensioners in PAYE paid too much tax because of the error. Up to 955,000 Self Assessment pensioners and around 760,000 Simple Assessment pensioners also had an incorrect State Pension figure used and may have paid too much tax.
Those numbers need careful interpretation. The Self Assessment and Simple Assessment figures are upper-limit estimates, not confirmed totals of people definitely owed money. HMRC also says an incorrect underlying calculation did not necessarily mean the final amount of tax collected was wrong.
Key highlights:
| Key point | What pensioners need to know |
|---|---|
| When did the problem begin? | The underlying PAYE systems issue dates to 2010 |
| Who definitely overpaid in 2024/25? | Around 1.4 million PAYE pensioners |
| Were more people potentially affected? | Yes, through Self Assessment and Simple Assessment |
| Did every incorrect figure cause an overpayment? | No, the final tax outcome depended on the individual calculation |
| What happens next? | A correction for future calculations and 2025/26 cases was promised for summer 2026 |
The central question is therefore not simply whether a pensioner was part of an affected system, but whether the wrong State Pension figure caused that individual to pay more Income Tax than was actually due.
What Exactly Has HMRC Admitted About Overtaxing State Pensioners?
HMRC acknowledged that an incorrect taxable State Pension amount had been used in some PAYE end-of-year reconciliations and had also fed into Self Assessment pre-population and Simple Assessment calculations.
The admission is set out in an official State Pension error letter dated 1 July 2026. It confirms that around 1.4 million PAYE pensioners paid too much tax because of the problem in 2024/25.
John-Paul Marks, HMRC’s Chief Executive and First Permanent Secretary, also gave a direct apology:
“I apologise for this error and especially to those pensioners who have been affected.”
The significance lies in both the scale and duration of the problem. However, it is important to separate confirmed PAYE overpayments from cases where an incorrect figure was used but the final tax paid may not have changed.
How Many Pensioners Were Overtaxed or Potentially Affected?
The largest confirmed figure relates to PAYE pensioners in 2024/25. Other groups may also have paid too much, but the available figures are not all equivalent.
Who Falls Into Each Group?
- Around 1.4 million PAYE pensioners paid too much tax because of the issue in 2024/25.
- Up to 955,000 Self Assessment pensioners may have had the wrong State Pension figure used. This is an upper limit.
- Around 760,000 Simple Assessment pensioners had an incorrect figure used and may have overpaid. This is also an upper-limit estimate in practice.
- The actual number of Self Assessment and Simple Assessment taxpayers who ultimately paid too much is expected to be lower than those headline figures.
The 2024/25 Position
| Tax route | Reported scale | What the figure means |
|---|---|---|
| PAYE | Around 1.4 million | Confirmed as having paid too much tax because of the issue |
| Self Assessment | Up to 955,000 | Potentially affected; actual number expected to be lower |
| Simple Assessment | Around 760,000 | Incorrect figure used; actual number who overpaid may be lower |
Adding every figure together and describing the result as a confirmed number of overtaxed pensioners would therefore be misleading. The evidence supports a large confirmed PAYE group and additional potentially affected groups requiring individual assessment.
Why Did the HMRC State Pension Tax Error Happen?
The error arose because some systems used the wrong method to calculate taxable State Pension income across a tax year in which the weekly pension rate changed.
How Should Taxable State Pension Income Normally Be Calculated?
State Pension is taxable income, although it is normally paid without tax being deducted directly. For most pensioners, the correct taxable amount for a year should reflect the weekly rates that actually apply across that tax year.
The official explanation says that, for most pensioners, this means one week at the previous year’s rate and 51 weeks at the current year’s rate.
The 52-week Calculation Problem
Some parts of the tax system instead used an amount equivalent to 52 weeks at the current year’s higher rate. That could slightly overstate the amount of taxable State Pension included in a calculation.
The problem was linked to a PAYE systems change introduced in 2010, in which the full requirements for the correct calculation method were not implemented.
Why Could an Overstated Pension Figure Lead to Too Much Tax?
Where the taxable pension amount was overstated, the tax difference depended on the taxpayer’s marginal Income Tax rate and the difference between one week at the old pension rate and one week at the new rate.
That means the individual loss was often relatively small in a single year, but the number of affected taxpayers was substantial.
Why Does the HMRC Overtaxing Problem Go Back to 2010?
The historical issue begins with the PAYE systems change introduced in 2010. Incorrect State Pension figures could then be used in some PAYE end-of-year reconciliations from 2010/11.
The problem later spread through connected tax processes. It affected Self Assessment pre-population through the online filing service from 2015/16 and Simple Assessment calculations from 2016/17.
This does not mean every State Pensioner was overtaxed in every year from 2010 onwards. It means the underlying calculation flaw existed in parts of the system and could affect different taxpayers in different years.
HMRC’s detailed analysis initially focused mainly on 2021/22 to 2024/25 because of the volume of historic data and data-retention considerations.
For a basic-rate taxpayer receiving the full pension, HMRC estimated average annual overpayments since 2021/22 of £1.76 for the full basic State Pension and £2.30 for the full new State Pension.
The historic reach of the error is therefore significant even though the amount involved for an individual in a particular year may have been small.
Did Every State Pensioner Affected by the Error Actually Pay Too Much Tax?
No. An incorrect State Pension figure did not automatically result in the wrong final amount of tax being collected. A person’s overall position could depend on several factors.
Why the Outcome Can Differ?
- The pensioner’s Personal Allowance and total taxable income.
- Income from workplace or private pensions.
- The marginal Income Tax rate applying to the individual.
- Whether a PAYE reconciliation changed the amount ultimately collected.
- Whether the discrepancy fell within administrative tolerances.
- Whether a Self Assessment taxpayer corrected or replaced a pre-populated figure.
For 2024/25 PAYE reconciliations, HMRC said it did not automatically issue small repayments below £9.99 and did not collect small underpayments below £49.99 under its operational tolerances.
This distinction is essential. A person can have an incorrect figure in an underlying calculation without necessarily having paid the wrong amount overall. Claims that every State Pensioner has automatically been overtaxed since 2010 are not supported by the official evidence.
Could Affected Pensioners Be Owed an HMRC Tax Refund?
Some pensioners may be entitled to repayment where the error resulted in more Income Tax being collected than was legally due. There is not, however, one standard refund amount for everyone.
What Could Determine the Size of a Refund?
The amount can depend on the difference between the correct and incorrect State Pension figures, the taxpayer’s marginal tax rate, other taxable income and the number of affected years.
HMRC’s estimates show why individual circumstances matter. A small error in taxable income does not translate into the same tax loss for a basic-rate, higher-rate or additional-rate taxpayer.
Historic Claims and Older Tax Years
The existence of an error dating to 2010 does not by itself guarantee that every person can obtain a repayment for every historic year. Tax correction and repayment routes can depend on the year, the type of assessment, the legal framework and the individual circumstances.
Anyone who believes too much tax was paid should follow the relevant tax overpayment and refund guidance and keep evidence supporting the figures they believe are correct.
Pensioners should therefore avoid assuming either that no action is possible or that a refund dating back to 2010 is automatically guaranteed.
How Can Pensioners Check Whether HMRC Used the Wrong State Pension Figure?
Pensioners can start by comparing the State Pension income used in their tax records with the amount they were actually entitled to receive for the relevant tax year.
Records worth checking:
- P800 end-of-year tax calculations.
- PAYE tax codes and coding notices.
- Self Assessment returns and calculations.
- Simple Assessment notices.
- State Pension payment records.
- P60s from workplace or private pensions.
- Previous correspondence about tax overpayments or underpayments.
A P800 can be especially relevant where an end-of-year PAYE reconciliation found that too much or too little tax had been paid. Self Assessment taxpayers should check whether a State Pension figure was pre-populated and whether it matched the correct taxable amount.
Where a clear discrepancy appears, the pensioner can contact the tax authority through the usual channels and explain which figure they believe is wrong and what the correct amount should be.
Checking the actual calculation is more reliable than assuming that a national headline confirms an individual refund entitlement.
What Should HMRC Do Next to Correct the Pension Tax Mistake?
The immediate challenge is to prevent the calculation error from recurring while establishing how affected historic cases should be handled fairly.
Identifying and Correcting Affected Tax Records
HMRC said it would deliver a solution during summer 2026 to correct future calculations. The planned work was also intended to ensure correct calculations for 2025/26 PAYE and Simple Assessment cases and enable corrections where affected 2025/26 Self Assessment returns had already been filed.
Will Affected Pensioners Be Contacted Automatically?
A universal automatic repayment process for every historic case was not confirmed in the 1 July letter. HMRC said people who believe they paid too much can use the usual contact channels, write about their individual circumstances or, where possible, amend a Self Assessment return.
That leaves an important practical question over how far the department can identify and correct older cases without placing the burden entirely on pensioners.
Transparency Over Historic Cases
Pensioners need clear information about which years will be reviewed, how actual overpayments will be distinguished from calculation discrepancies, whether further action is required and how any repayment will be calculated.
HMRC has also commissioned an internal audit into the history and causes of the issue, with further conclusions and next steps expected later in 2026. Clear communication will be particularly important for vulnerable and digitally excluded taxpayers.
Conclusion
The admission that an HMRC State Pension tax calculation error dates back to 2010 is significant because the flaw remained in parts of the tax system for years and affected calculations involving a large number of pensioners.
The clearest confirmed figure is that around 1.4 million PAYE pensioners paid too much tax in 2024/25 because of the issue.
Up to 955,000 Self Assessment pensioners and around 760,000 Simple Assessment pensioners were potentially affected by incorrect figures, but those numbers should not be treated as confirmed refund totals.
For pensioners concerned that HMRC admitted overtaxing millions of State Pensioners since 2010, the safest next step is to check individual tax calculations and pension records rather than assume the headline applies automatically to every case.
The coming correction work and the promised internal review should provide more clarity. Until then, affected pensioners should retain relevant records, check calculations carefully and rely on official guidance before making financial decisions.
FAQs
Can someone be affected without completing a Self Assessment tax return?
Yes. The issue also affected PAYE end-of-year reconciliations and Simple Assessment calculations, so completing a Self Assessment return was not necessary to be potentially affected.
What is a P800 and why could it matter in this case?
A P800 is an end-of-year tax calculation that can show whether a person has paid too much or too little Income Tax. Pensioners reviewing this issue may find it useful when checking the income figures used in a PAYE reconciliation.
Could the wrong State Pension amount affect a pensioner’s tax code?
It may be relevant where estimated taxable income affects how tax is collected through PAYE. However, the exact effect depends on the individual’s income sources and tax calculation.
Should pensioners contact HMRC immediately about the error?
Anyone who identifies a clear discrepancy can contact HMRC through the usual channels. It is sensible to gather the relevant tax calculations, pension payment information and supporting records first.
What documents could help show that too much tax was paid?
Useful evidence can include P800 calculations, coding notices, P60s, Self Assessment records, Simple Assessment notices, State Pension payment information and correspondence about previous tax adjustments.
Can a family member help an elderly pensioner deal with HMRC?
Yes, but appropriate permission may be required before another person can discuss confidential tax affairs. Official guidance explains how to authorise someone to help, including a friend, relative, voluntary organisation or professional agent in relevant circumstances.
What happens if a pensioner disagrees with a corrected tax calculation?
The pensioner should compare the calculation with supporting records and raise the specific figures they believe are incorrect. The appropriate review, amendment or appeal route can depend on whether the case involves PAYE, Self Assessment or another formal tax decision.
