HMRC has acknowledged overtaxing 1.4 million pensioners following a 15-year blunder. The government’s tax authority confirmed the error originated from a 2010 system overhaul and issued an apology to those affected.
The mistake was brought to light following an investigation by Telegraph Money, prompting HMRC chief executive John-Paul Marks to issue an apology in a letter addressed to MPs. In the correspondence, John-Paul Marks, head of the tax office, expressed regret over the error, which has resulted in pensioners being overcharged since 2010-11.
Mr Marks revealed that approximately 1.4 million pensioners within PAYE had overpaid tax in 2024-25 as a direct consequence of the issue.
This represented an increase from 1.17 million in 2023-24 and 762,000 in 2022-23.
Furthermore, as many as 955,000 pensioners in self assessment and 760,000 in simple assessment may have overpaid tax in 2024-25 due to an incorrect state pension figure being utilised in HMRC’s calculations , reports Birmingham Live.
Mike Warburton, The Telegraph’s tax columnist, who first exposed the problem in May, said: “There seems to be a state of chaos in HMRC over this issue and it is pensioners who are being left confused and overtaxed.”
Jon Greer, of investment company Quilter, said: “While the amounts involved appear relatively small at an individual level, the fact it has affected so many people means it may have unfairly topped up government coffers.”
He continued: “While HMRC says it is working on a solution to prevent the issue from happening again, it falls short of saying it will repay those affected automatically, because it falls within their administrative tolerances.
“Pensioners who believe they may have overpaid will need to take matters into their own hands and contact HMRC directly.”
Mr Marks revealed the problem had cost basic rate taxpayers receiving the full basic state pension £1.76 a year on average between 2021-22 and 2024-25, and £2.30 for those on the full new state pension.
He said: “I apologise for this error and especially to those pensioners who have been affected. I know that any shortfall matters, particularly to customers on fixed or limited incomes. I would like to reassure the committee that HMRC is taking this issue very seriously and we are working at pace to put in place a solution.”
An HMRC spokesman said: “We’re confident most state pensioners won’t be affected, and for those that are, the impact is small, with the difference in annual tax paid only a few pounds in most cases.”