London, June 14, 2026, 16:02 (BST).
- HMRC says it made an error in state pension tax calculations that hit some pensioners.
- The Sunday Times said up to 8.7 million pensioners could have seen their tax bills inflated by around £5 each.
- Hundreds of thousands of state pension cases have gone under review after historic underpayment errors, separate DWP figures show.
HM Revenue & Customs is under pressure to fix a tax mistake that may have led millions of pensioners to overpay on their state pension income. The problem is with the way HMRC works out taxable state pension following the annual April increase. According to The Sunday Times, the agency may have collected up to £43.5 million too much last year, overstating income tax bills by about £5 each for around 8.7 million pensioners.
Tax error in state pension calculation flagged by HMRC last September Treasury minister Dan Tomlinson said last September that HMRC usually works out taxable state pension for PAYE customers with one week at the old rate and 51 weeks at the new rate. But, he told parliament, a group of people had tax calculated on 52 weeks at the new rate instead. The result was a tax difference of about £5. Tomlinson said anyone affected could contact HMRC to get incorrect state pension numbers fixed.
HMRC said sorry for the mistake and said it is fixing things. The department said most cases have only seen small impacts. The Sun reported HMRC plans to sort out the issue later this summer. So far, affected pensioners have not received automatic refunds or personal notifications, according to .
The issue is important since the state pension counts as taxable income, but tax isn’t taken off before payment. According to the Low Incomes Tax Reform Group, pensioners don’t get a P60 for their state pension and have to track the taxable figure themselves. The amount that counts for tax can be different from what lands in the bank in the tax year.
Sir Steve Webb, ex-pensions minister and LCP partner, told The Sunday Times the mistake was “remarkably careless,” as it meant possibly millions of pensioners were taxed using the wrong state pension figure. GOV.UK lists the full new state pension at £241.30 a week, which is almost level with the £12,570 personal allowance if paid for a full year. The Times
The tax error is showing up at the same time as fresh scrutiny on separate DWP state pension underpayments. DWP data puts the number of underpayments found from January 11, 2021 to March 31, 2025 at 130,948. The total value is £804.7 million. The official figures include married pensioners, widowed pensioners and people over 80. Average arrears were £5,553 for married Category BL cases, £11,725 for widowed cases, and £2,203 for those in Category D over 80.
HRP error fix sends £104m to pensioners shortchanged on NI records A separate Home Responsibilities Protection correction effort has flagged cases where pensioners lost out because HRP wasn’t recorded on National Insurance files. DWP says from January 8, 2024 to March 31, 2025, the check uncovered 12,379 underpayments and sent out around £104 million in arrears. The average payment was £8,377. Customers can still ask HMRC to add missing HRP to their National Insurance record. After that, DWP updates the state pension and pays any arrears owed.
Back payments might cause new tax issues. LITRG says state pension arrears count as taxable for the year they were due, not the year paid. HMRC will only go after income tax on back payments from the current and previous four tax years for payments people get in 2026/27.
