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HMRC has admitted that a historical error in the taxable State Pension figures used in some tax calculations dates back to a PAYE systems change introduced in 2010. For the 2024/25 tax year, HMRC estimates that around 1.4 million pensioners in PAYE paid too much tax because of the error.
Separately, up to 955,000 Self Assessment pensioners and around 760,000 Simple Assessment pensioners had an incorrect State Pension figure used in their calculations and may have paid too much. Those latter figures are upper limits and should not be treated as confirmed numbers of people owed refunds.
The mistake arose because parts of HMRC’s systems used a State Pension amount equivalent to 52 weeks at the current year’s rate. For most pensioners, HMRC says the taxable figure should instead have reflected one week at the previous year’s rate and 51 weeks at the current year’s rate.
Key Highlights:
| Key point | What is currently confirmed |
| Origin of the error | A PAYE systems change introduced in 2010 |
| PAYE impact in 2024/25 | Around 1.4 million pensioners paid too much tax |
| Self Assessment | Up to 955,000 potentially affected in 2024/25 |
| Simple Assessment | Around 760,000 potentially affected in 2024/25 |
| Main calculation issue | 52 weeks at the current rate used instead of one previous-rate week plus 51 current-rate weeks |
| Average estimated annual loss | £1.76 for a full basic State Pension or £2.30 for a full new State Pension for a basic-rate taxpayer, averaged across 2021/22 to 2024/25 |
| Next action | A system fix and 2025/26 corrections were planned for summer 2026 |
The central point is therefore more precise than the headline alone: HMRC has confirmed a long-running tax-calculation error, but not every incorrect figure necessarily resulted in an actual tax overpayment.
What Exactly Has HMRC Admitted About Overtaxing State Pensioners Since 2010?
HMRC has acknowledged that an incorrect taxable State Pension figure was used in some PAYE end-of-year reconciliations and later fed into Self Assessment pre-population and Simple Assessment calculations. The issue concerns the figure used for tax purposes, not the underlying State Pension entitlement paid to a pensioner.
What HMRC Has Confirmed?
- 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 been affected that year.
- Around 760,000 Simple Assessment pensioners may also have been affected.
- The problem can be traced back to a systems change introduced in 2010.
HMRC chief executive John-Paul Marks wrote: “I apologise for this error and especially to those pensioners who have been affected.”
The admission is significant, but the figures must be reported carefully because confirmed PAYE overpayments and potentially affected calculations are not the same measure.
Why Did the HMRC State Pension Tax Error Begin in 2010?
The problem began because the full requirements for calculating taxable State Pension income were not correctly implemented during a PAYE systems change in 2010.
State Pension is taxed on an accruals basis. Because the weekly rate can change during a tax year, the taxable amount should reflect the pension a person was entitled to over that year rather than simply multiplying the latest weekly rate by 52.
HMRC says the correct calculation for most pensioners is one week at the previous year’s rate plus 51 weeks at the current year’s rate.
The official historical error letter states that some PAYE end-of-year reconciliations used the incorrect figure from 2010/11 onwards. The same underlying problem later reached other tax processes.
However, “since 2010” does not mean every State Pensioner was overtaxed in every tax year. The effect depended on the system used, the person’s tax position and whether the discrepancy changed the tax ultimately collected.
How Did HMRC’s 52-Week Calculation Mistake Lead to Too Much Tax?
The error could overstate taxable State Pension income by treating one week as payable at the newer, higher rate when it should have been calculated at the previous year’s rate.
How Should the Correct State Pension Calculation Work?
For most pensioners, HMRC says the taxable annual State Pension figure should use one week at the previous year’s weekly rate and 51 weeks at the current year’s rate. This reflects how the tax year and annual pension uprating interact.
The 52-Week Figure Used in Some Systems
Parts of HMRC’s systems instead used the equivalent of 52 weeks at the current-year rate. Because the current rate is normally higher after an annual uprating, that could create a slightly inflated taxable income figure.
Why Could an Overstated Figure Increase a Tax Bill?
Where the discrepancy affected the final calculation, the extra tax was based on the person’s marginal tax rate applied to the difference between one week at the old rate and one week at the new rate.
That explains why the average individual loss was relatively small in many cases, while the overall systems issue still affected very large numbers of tax calculations.
How Many State Pensioners Were Overtaxed or Potentially Affected?
The clearest confirmed figure is around 1.4 million PAYE pensioners who paid too much tax in 2024/25 because of the error.
For Self Assessment, HMRC estimated that up to 955,000 pensioners may have had an incorrect State Pension figure used in 2024/25. It explicitly described this as an upper limit because some people used third-party software or replaced the pre-populated figure themselves.
For Simple Assessment, around 760,000 pensioners had an incorrect figure used and may have paid too much tax, but the actual number affected could be lower depending on whether the balance was ultimately collected.
The historical data also shows the PAYE figure rising from about 720,000 in 2021/22 to 1.409 million in 2024/25. These annual figures should not simply be added together as unique individuals because the same pensioner may appear in more than one tax year.
Does Every Incorrect State Pension Figure Mean a Pensioner Paid Too Much Tax?
No. HMRC says an incorrect underlying figure did not necessarily change the amount of tax actually collected or repaid.
Why the Numbers Need Careful Interpretation?
- PAYE, Self Assessment and Simple Assessment figures measure different types of impact.
- Some small differences fell within longstanding administrative tolerances.
- A person could have an incorrect pension figure without ultimately paying extra tax.
- Self Assessment and Simple Assessment estimates are upper limits, not confirmed refund counts.
- The same individual may have been affected in several tax years.
HMRC said that, in 2024/25, around 4.65 million pensioners with PAYE reconciliation underpayments of less than £49.99 were not pursued, while around 118,000 small repayments below £9.99 were not automatically issued.
For that reason, claims that every potentially affected pensioner is definitely owed money, or that millions were overtaxed in every year since 2010, go beyond the evidence currently published.
Which Tax Systems and Tax Years Were Affected by the HMRC Error?
The problem reached different tax systems at different times, so there is no single start date for every affected pensioner.
PAYE Reconciliations From 2010/11
Some PAYE end-of-year reconciliations used the incorrect taxable State Pension figure from 2010/11 following the 2010 systems change.
Why Did Self Assessment Become Affected Later?
From 2015/16, the incorrect figure could feed into State Pension information pre-populated in HMRC’s online Self Assessment service. People using third-party software were not affected through that specific pre-population process.
Simple Assessment Calculations From 2016/17
The issue reached Simple Assessment calculations from 2016/17. This route is often used where tax cannot be collected automatically, including some cases involving taxable State Pension income.
Timeline of the affected systems:
| Tax process | Earliest period identified |
| PAYE end-of-year reconciliation | 2010/11 |
| Self Assessment online pre-population | 2015/16 |
| Simple Assessment | 2016/17 |
The timeline matters because a pensioner’s possible exposure depends on how their tax was calculated in each particular year.
How Much Money Could Affected State Pensioners Have Lost?
For basic-rate taxpayers, HMRC estimated that the average amount overpaid in any one tax year between 2021/22 and 2024/25 was £1.76 for someone receiving the full basic State Pension and £2.30 for someone receiving the full new State Pension.
Those are averages, not guaranteed refund amounts. A person’s actual position can vary according to their pension entitlement, enhancements, marginal tax rate and whether the incorrect figure affected the final liability.
The year-by-year official calculations also show that the tax effect changed with pension uprating. For example, the illustrative basic-rate tax effect for a full new State Pension was £3.74 in 2023/24 and £3.47 in 2024/25, while higher-rate taxpayers could face larger differences.
Although individual amounts may be small, accuracy still matters when an error persists for years and affects large numbers of older taxpayers, particularly those living on fixed or limited incomes.
What Is HMRC Doing to Fix the Error and Deal With Possible Overpayments?
HMRC said it would deliver a solution in summer 2026 to correct future tax calculations and address the latest completed tax year.
The Summer 2026 Fix and 2025/26 Corrections
The planned solution was intended to prevent the error recurring, apply correct calculations to 2025/26 PAYE and Simple Assessment cases, and enable corrections for people who had already filed affected 2025/26 Self Assessment returns. HMRC also commissioned an internal audit into the history and causes of the problem.
How Can Concerned Pensioners Raise Their Own Cases?
HMRC said people who believe they paid too much tax can use the usual PAYE or Self Assessment contact routes, write about their individual circumstances or, where possible, amend a Self Assessment return.
The official tax refund guidance also explains that a person who believes the amounts used in a tax calculation are wrong can contact HMRC and identify the figures they believe should be corrected.
A refund should therefore not be assumed until the individual’s tax position has been checked.
What Should State Pensioners Do Now if They Think HMRC Overtaxed Them?
A pensioner who is concerned should first identify how their tax was calculated and then review the relevant records rather than assuming the headline figures automatically apply to them.
Practical next steps:
- Check whether the relevant year involved PAYE, Self Assessment or Simple Assessment.
- Review P800 calculations, tax returns, Simple Assessment letters and available State Pension records.
- Compare the State Pension figure used for tax with the amount that should have been brought into the calculation.
- Contact HMRC where a figure appears incorrect.
- Keep copies of calculations, letters and any correspondence about a possible correction or repayment.
For Simple Assessment, the official Simple Assessment guidance says a person who believes the amounts used are wrong can ask for a review and should explain which figures are incorrect and what they believe the correct amounts should be.
The key message is that HMRC admitted a State Pension tax error linked to systems dating back to 2010, but each person’s position depends on their tax method, tax year and individual calculation.
Conclusion
HMRC’s admission that State Pension tax calculations were wrong in some cases since 2010 highlights a long-running systems failure affecting large numbers of pensioners.
Although not everyone with an incorrect figure necessarily overpaid tax, the issue has raised important questions about accuracy, accountability and refunds.
Pensioners who are concerned should review their tax records, follow the latest official guidance and contact HMRC where figures appear incorrect. Further updates are expected as correction work and the internal review continue through 2026.
FAQs About HMRC Admits State Pension Tax Error Hits Millions Since 2010
Is this the same as the DWP State Pension underpayment scandal?
No. This issue concerns the taxable State Pension figure used in some HMRC tax calculations. It is separate from cases where a person may have been paid less State Pension than they were entitled to receive.
Could the same pensioner appear in more than one affected tax year?
Yes. HMRC says the error may have affected some or all relevant years for an individual, depending on the tax system used. Annual affected figures should therefore not automatically be added together as unique people.
Did HMRC change the amount of State Pension paid into bank accounts?
The identified error concerns the State Pension amount used for tax purposes. It does not, by itself, mean that the underlying State Pension payment made to a pensioner was reduced.
Could higher-rate taxpayers have lost more than the published averages?
Yes. The tax effect depends partly on a person’s marginal tax rate. HMRC’s year-by-year illustration shows larger effects at higher and additional rates than at the basic rate.
What documents could help when checking an old tax calculation?
Relevant records may include P800 calculations, Self Assessment returns, Simple Assessment notices, State Pension correspondence and previous HMRC letters. The records available will vary by person and tax year.
Could administrative tolerances affect whether a small overpayment is refunded?
Yes. HMRC said longstanding tolerances meant some very small repayments were not automatically issued and some small underpayments were not pursued. A discrepancy therefore did not always change the tax ultimately collected or repaid.
Will the findings of HMRC’s internal investigation be published?
John-Paul Marks said the conclusions of the internal audit would be shared with the Treasury Committee and that he would write again after the fix was implemented and the review concluded later in 2026.
