HM Revenue and Customs (HMRC) has confirmed it overcharged nearly 8.7 million state pensioners due to a calculation error, resulting in an estimated £43.5 million in excess tax collected last year. The error inflated the annual tax bills of affected pensioners by approximately £5 each.
An HMRC spokesperson apologized for the mistake, stating, “We regret the error affecting this group and are actively working to correct it. The tax difference is minor, with most cases seeing a £5 discrepancy.”
Conservative Party shadow chancellor Sir Mel Stride criticized the oversight, saying, “If millions of pensioners have been overcharged, it is crucial that the issue is addressed immediately. Ministers must investigate the cause and implement measures to prevent similar errors in the future.”
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The error was initially highlighted by Conservative MP Richard Holden in August last year via a parliamentary question. HMRC acknowledged the issue in September, explaining that for some pensioners, tax calculations were mistakenly based on 52 weeks at the new state pension rate rather than correctly prorated figures.
Former pensions minister Sir Steve Webb described the situation as “remarkably careless,” highlighting that many pensioners are unaware of complex tax rules surrounding their state pension. He expressed concern that such mistakes went unnoticed and uncorrected for so long.
Antonia Stokes, senior manager at the Low Incomes Tax Reform Group, also called for swift action from HMRC. She noted the difficulty pensioners face in understanding how their taxable pension amounts are calculated and urged HMRC to proactively rectify incorrect pension taxation and minimize the burden on taxpayers.
HMRC has advised affected individuals to contact them directly to amend any inaccurate state pension tax figures and recover any overpaid tax.