HMRC Admitted Overtaxing Millions Of State Pensioners Since 2010: How To Claim Your Refund
HMRC admitted overtaxing millions of state pensioners since 2010 due to a calculation error that applied the wrong number of weeks of state pension income when working out tax owed. As of July 2026, the tax authority says roughly 1.4 million PAYE pensioners were overcharged in the 2024 to 2025 tax year alone.
Key Takeaways
- HMRC has confirmed that around 1.4 million PAYE pensioners were overtaxed in the 2024 to 2025 tax year because of a calculation fault dating back to a 2010 system change.
- A separate error affected up to 1.7 million pensioners completing Self Assessment or Simple Assessment, caused by HMRC’s online tool applying 52 weeks of state pension at the higher rate instead of the correct 51 week and one week split.
- HMRC chief executive John Paul Marks apologised to the Public Accounts Committee and confirmed a fix is expected during summer 2026, though refunds are not automatic and pensioners must contact HMRC themselves.
Why Has HMRC Overtaxed Pensioners Since 2010?
HMRC overtaxed pensioners since 2010 because its PAYE system failed to apply a rule that splits state pension income across two different weekly rates each April. Under the triple lock, the state pension rises every April by whichever is highest out of inflation, average earnings growth or 2.5%.
Because pension day and the start of the tax year rarely fall on the same date, HMRC’s own guidance calls for the previous year’s lower rate to cover one week, with the new higher rate applied for the remaining 51 weeks.
A system change made in 2010 broke this calculation. Instead of applying the correct 51 week and one week split, HMRC’s PAYE system charged tax as though pensioners received 52 weeks at the new, higher rate throughout the year.
The Department for Work and Pensions supplied state pension figures on a flat annual basis, and HMRC’s system used that figure without adjusting for the split week rule its own tax calculations require.
How Many Pensioners Are Affected?
HMRC estimates that millions of pensioners across three separate tax systems have been caught up in this miscalculation, though the exact scale differs depending on how each person pays tax.
| Tax System | Pensioners Affected (2024 to 2025) | Affected Since |
|---|---|---|
| PAYE | Approximately 1.4 million | 2010 to 2011 |
| Self Assessment | Up to 1.7 million combined with Simple Assessment | 2015 to 2016 |
| Simple Assessment | Included within the 1.7 million figure above | 2016 to 2017 |
Some coverage of this story has treated the 1.4 million PAYE figure and the 1.7 million Self Assessment and Simple Assessment figure as one combined total.
In reality, HMRC chief executive John Paul Marks made clear in his letter to the Public Accounts Committee that these are two separate error strands affecting different tax systems, and a pensioner is not necessarily counted in both groups.
Basic rate taxpayers receiving the full basic state pension lost an average of £1.76 a year between the 2021 to 2022 and 2024 to 2025 tax years, rising to £2.30 a year for those on the full new state pension. These figures were confirmed as of July 2026, in HMRC’s letter to the Public Accounts Committee.
Which Group You’re In? PAYE, Self Assessment or Simple Assessment
Most pensioners fall into one of three groups, and knowing which applies to you helps you check the right records for this particular fault.
- If your pension provider or employer deducts tax automatically through a tax code, you are taxed under PAYE, and any error would show up on your annual P800 tax calculation.
- If you complete an annual tax return, you are taxed under Self Assessment, and the error would appear as a wrong state pension figure pre filled by HMRC’s online system.
- If HMRC sends you a tax bill without asking you to file a return, you are under Simple Assessment, introduced in 2016 to 2017 for pensioners whose state pension alone can exceed the Personal Allowance.
How to Check If You’ve Been Overtaxed?
You can check whether you have been overtaxed by comparing the state pension figure HMRC used against your actual weekly rate.
- Log into your personal tax account on the GOV.UK website and look for your P800 tax calculation for the relevant tax year.
- Check the pension amount HMRC has recorded against the weekly rate you were actually paid, remembering the correct figure should reflect the current rate for most of the year, with one week still calculated at the previous, lower rate.
- If you complete Self Assessment, compare your pre filled entry against your official pension statement before submitting, since a related HMRC state pension tool error has separately affected some online calculations too.
- Contact HMRC directly if the figures do not match, since the tax authority has confirmed it will not automatically identify every case.
Will HMRC Refund You Automatically?
HMRC will not automatically refund every pensioner affected by this error, despite the scale of the problem. That means you need to check your own figures and contact HMRC if you believe you have been overtaxed, since the responsibility currently sits with the taxpayer rather than the tax office.
Separating the Facts from the Confusion Around This HMRC Error
| Myth | Reality |
|---|---|
| HMRC will automatically send refunds to everyone affected | Refunds are not automatic outside of standard PAYE year end adjustments, and many pensioners must contact HMRC directly |
| The error only affects people who already pay a lot of tax | Even pensioners with modest incomes have been affected, since the fault applies to the state pension figure itself |
| This is a brand new problem | The underlying PAYE fault dates back to a system change made in 2010, though HMRC only confirmed it publicly this year |
| Self Assessment users are not affected | Up to 1.7 million Self Assessment and Simple Assessment pensioners have also been affected by a related pre filling error |
| Fixing your tax code solves the problem for past years | A corrected tax code only prevents future overcharges, so past years still need to be checked and reclaimed separately |
How to Claim Back Overpaid Tax?
You can claim back overpaid tax by contacting HMRC once you have confirmed that the figures on your P800 or Self Assessment record are wrong.
- Gather your P800 tax calculations or Self Assessment records for each tax year you believe was affected, going back as far as 2010 to 2011 if you were taxed under PAYE throughout.
- Contact HMRC through your personal tax account, by phone, or by post, and explain that the state pension figure used in your tax bill does not match HMRC’s own weekly rate rules.
- Provide supporting evidence such as your state pension award letter or annual uprating notice showing your actual weekly rate for each affected year.
- Wait for HMRC to recalculate your tax position and issue any refund due once your claim has been checked and verified.
Why More Pensioners Are Being Pulled Into Tax?
The Personal Allowance has been frozen at £12,570 since the 2021 to 2022 tax year and will remain frozen until April 2031.
Because the state pension continues to rise under the triple lock, a growing number of pensioners whose only income is the state pension are now being pulled into paying income tax for the first time.
Several factors are combining to increase pensioner tax bills beyond this specific error.
- The Personal Allowance freeze means the tax free threshold has not risen since the 2021 to 2022 tax year, even as the state pension has increased every year since.
- The triple lock guarantees the state pension rises by the highest of inflation, average earnings growth or 2.5%, narrowing the gap to the Personal Allowance with each uprating.
- Other support, such as the Winter Fuel Payment continues to reach pensioner households at the same time, meaning many are now managing several HMRC and DWP processes together.
The House of Commons Library points to the same combination, the frozen Personal Allowance alongside triple lock uprating, as the main reason more pensioners are being drawn into paying tax on their state pension for the first time.
What Happens Next?
HMRC has confirmed it expects to fix the underlying calculation fault during summer 2026, ensuring the 2025 to 2026 tax year is unaffected.
Chief executive John Paul Marks apologised directly to the Public Accounts Committee, telling MPs that the complexity of reconciling DWP pension data with PAYE, Self Assessment and Simple Assessment systems had delayed a solution.
Marks succeeded Sir Jim Harra as HMRC’s chief executive in April 2025 and said the tax authority was working at pace to prevent the issue recurring.
This error sits alongside a wider run of HMRC changes reaching pensioners in the coming years, including the planned HMRC inheritance tax changes 2027, which is worth keeping an eye on regardless of how this particular issue is resolved.
Conclusion
HMRC admitted overtaxing millions of state pensioners since 2010 because its PAYE system failed to apply the correct weekly rate calculation each April.
Refunds are not automatic, so checking your P800 or Self Assessment record remains the only reliable way to confirm whether you are owed money. HMRC overtaxing state pensioners since 2010 means real, if often small, lost income for millions of retirees in 2026.
FAQ
Has HMRC overtaxed state pensioners?
Yes. HMRC has confirmed that a calculation fault dating back to a 2010 system change caused millions of state pensioners to be overtaxed across PAYE, Self Assessment and Simple Assessment.
How much has HMRC overtaxed pensioners by?
The impact varies by individual, but HMRC has said the average shortfall is small, often between £2 and £5 a year, though the effect can be larger for some pensioners once several tax years and pension income are added together.
Am I owed a refund from HMRC?
Yes, if your state pension figure was calculated using 52 weeks at the current rate instead of the correct 51 week and one week split, you may be entitled to a refund. Checking your P800 or Self Assessment record will confirm this.
Will HMRC automatically refund me?
No. HMRC has not committed to issuing automatic refunds for every affected tax year, so pensioners generally need to identify the error themselves and contact HMRC to request a correction.
When will HMRC fix the error?
HMRC has said it expects to resolve the underlying calculation fault during summer 2026, so that the 2025 to 2026 tax year is calculated correctly from the outset.
This article is for general information only and is not financial or tax advice; contact HMRC or a qualified adviser about your own circumstances.
