{"id":125701,"date":"2026-09-19T07:30:00","date_gmt":"2026-09-19T06:30:00","guid":{"rendered":"https:\/\/en.econostrum.info\/uk\/?p=125701"},"modified":"2026-09-19T03:50:52","modified_gmt":"2026-09-19T02:50:52","slug":"hmrc-to-refund-3-2-million-pensioners","status":"publish","type":"post","link":"https:\/\/en.econostrum.info\/uk\/hmrc-to-refund-3-2-million-pensioners\/","title":{"rendered":"HMRC To Refund 3.2 Million Pensioners After State Pension Tax Error"},"content":{"rendered":"\n

HM Revenue and Customs (HMRC)<\/strong> will refund around 3.2 million pensioners<\/strong> after discovering that incorrect state pension<\/strong> figures were used in some tax calculations, causing some retirees to pay more tax than they owed. The repayments will total around \u00a319.3 million<\/strong>, with affected taxpayers expected to receive corrections automatically.<\/p>\n\n\n\n

The average repayment is estimated at around \u00a36 per person<\/strong>, although the amount will depend on each individual\u2019s circumstances. HMRC said most people affected since the 2020-21 tax year<\/strong> will not need to contact the department because their tax records will be reviewed and corrected.<\/p>\n\n\n\n

How The HMRC State Pension Tax Error Happened<\/h2>\n\n\n\n

The issue involved the way HMRC<\/strong> calculated the taxable value of the state pension<\/strong> when working out how much income tax some pensioners owed on other income, such as private pensions or earnings.<\/p>\n\n\n\n

The error was first revealed by The Telegraph<\/a><\/strong>, which reported that HMRC had used incorrect state pension figures in some tax calculations. The mistake related to annual pension increases, which do not always begin on the first day of the tax year.<\/p>\n\n\n\n

Under HMRC guidance, the taxable amount should often be calculated using one week at the previous year\u2019s rate and 51 weeks at the new rate. In some cases, HMRC systems instead applied the new rate for the full 52 weeks.<\/p>\n\n\n\n

This meant some pensioners\u2019 taxable state pension income was recorded as slightly higher than it should have been, resulting in small overpayments of tax over several years.<\/p>\n\n\n\n

HMRC Will Automatically Correct Affected Tax Records<\/h2>\n\n\n\n

The state pension<\/strong><\/a> is taxable, but tax is not deducted directly before payments are made. Instead, HMRC usually considers the pension amount when calculating tax due on other sources of income.<\/p>\n\n\n\n

In a letter to the Treasury Select Committee<\/strong>, HMRC chief executive John-Paul Marks<\/strong> said the department would identify affected taxpayers and automatically correct their tax positions. Refunds will be made through PAYE tax code adjustments<\/strong>, credits to Self Assessment<\/strong> tax accounts, or other payment methods where necessary.<\/p>\n\n\n\n

\u201cIf customers believe they were affected in earlier years and have the necessary evidence, they can ask HMRC to review their position. These requests will be considered on a case-by-case basis,\u201d Mr Marks said.<\/p>\n\n\n\n

\u201cI am sorry that this error occurred and recognise the impact on affected customers.\u201d<\/p>\n\n\n\n

HMRC said it expects the majority of corrections and repayments to be completed during the 2026-27 financial year<\/strong>.<\/p>\n\n\n

\n
\"HMRC
Under HMRC guidance, the taxable amount should often be calculated using one week at the previous year\u2019s rate and 51 weeks at the new rate.
Credit: Shutterstock<\/figcaption><\/figure><\/div>\n\n\n

Criticism Over HMRC\u2019s Handling Of The Mistake<\/h2>\n\n\n\n

The error has raised concerns about the checks used in HMRC\u2019s tax systems. Steve Webb<\/strong>, former pensions minister and partner at LCP<\/strong>, said the mistake showed the difficulty many people face when dealing with the tax system.<\/p>\n\n\n\n

\u201cIt is hard enough for citizens to understand the tax system, but in this case it looks as though HMRC didn\u2019t know its own rules,\u201d Webb said.<\/p>\n\n\n\n

\u201cThe trouble is, HMRC was pre-filling in people\u2019s tax returns with the wrong figure, resulting in a small excess tax payment. If proper checks were done when these systems were set up, these errors would be spotted.\u201d<\/p>\n\n\n\n

\u201cInstead there will have to be a huge bureaucracy to refund a few pounds each to millions of pensioners\u201d.<\/p>\n\n\n\n

HMRC Updates Systems To Prevent Future Errors<\/h2>\n\n\n\n

HMRC said it has already made changes to prevent the same issue from happening again. On August 25<\/strong>, the department updated its systems so future annual tax reconciliations for PAYE<\/strong> and Simple Assessment<\/strong> customers use the correct state pension figures.<\/p>\n\n\n\n

HMRC said these groups represent the \u201csubstantial majority\u201d of affected taxpayers. The department also planned to correct pre-filled figures for Self Assessment<\/strong> customers who had not yet submitted their 2025-26 tax returns<\/strong> during September.<\/p>\n\n\n\n

Those who already filed their returns will have their records adjusted afterwards.<\/p>\n\n\n\n

What Pensioners Need To Do About The Refunds<\/h2>\n\n\n\n

People affected from the 2020-21 tax year onwards<\/strong> should not normally need to make a claim, as HMRC will identify those taxpayers and update their records automatically.<\/p>\n\n\n\n

The way refunds are received will depend on how someone pays tax. Some pensioners may see an adjustment to their PAYE tax code<\/strong>, while others may receive a credit through their Self Assessment<\/strong> account or another repayment method.<\/p>\n\n\n\n

Those who believe they were affected before the 2020-21 tax year will need to contact HMRC themselves and provide evidence, such as previous tax calculations, pension statements, or other records showing how their tax bill was calculated.<\/p>\n\n\n\n

HMRC is also carrying out an internal audit review into how the error occurred, and the department said it expects the majority of corrections and repayments to be completed during the 2026-27 financial year<\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Millions of UK pensioners will receive automatic tax refunds after HMRC admitted that incorrect state pension figures were used in calculations, with repayments linked to an error dating back to the 2020-21 tax year.<\/p>\n","protected":false},"author":4,"featured_media":125702,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[44],"tags":[],"class_list":["post-125701","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33","no-featured-image-padding"],"_links":{"self":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/125701","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/comments?post=125701"}],"version-history":[{"count":3,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/125701\/revisions"}],"predecessor-version":[{"id":125705,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/125701\/revisions\/125705"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/media\/125702"}],"wp:attachment":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/media?parent=125701"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/categories?post=125701"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/tags?post=125701"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}