By GB News (World News) | Created at 2026-06-14 10:55:47 | Updated at 2026-06-14 14:44:26
3 hours ago
HM Revenue & Customs has been knowingly overcharging millions of pensioners on their income tax for at least ten months without informing the public or issuing automatic refunds.
The Government agency may have collected up to £43.5million through the error, which added roughly £5 to the tax bills of as many as 8.7 million pensioners who pay income tax.
The issue was first brought to HMRC's attention in August last year, yet the agency did not notify the Department for Work and Pensions until October.
An HMRC spokesman told The Sunday Times: "We apologise to those affected by this calculation error and are working to fix the issue, although the impact is small with the difference in tax owed being around £5 in most cases."
The tax authority expects to resolve the problem this summer.
The overcharging stems from HMRC's failure to correctly calculate tax liabilities following annual state pension increases under the triple lock guarantee.
According to HMRC's own guidance, pensioners' tax should be worked out using 51 weeks at the current year's state pension rate and one week at the previous year's figure. This accounts for the brief gap between the tax year starting on April 5 and when pensioners first receive their uprated payment.
Instead, the tax authority has been calculating income based on 52 weeks at the higher rate, relying on DWP data rather than its own rules.
HMRC have potentially collected over £40million overcharging pensioners on income tax
GETTY
For 2025/26, the new state pension rose to £230.25 weekly from £221.20 the previous year. This meant pensioners' income was recorded as £9.05 higher than reality, resulting in basic-rate taxpayers being overcharged £1.81, higher-rate payers £3.62, and additional-rate taxpayers £4.
Critics have demanded HMRC reveal how long the problem has persisted, how many pensioners have been affected, and commit to actively issuing refunds.
Sir Mel Stride, the shadow chancellor, said: "If HMRC have been charging millions of pensioners too much tax then questions need to be answered and the matter must be urgently put right. Ministers need to ascertain what has happened and what action is being taken to ensure these sorts of errors do not happen again."
Sir Steve Webb, a former pensions minister during the coalition government and now a partner at pension consultants LCP, described the situation as "remarkably careless".
Sir Mel Stride has called for a review to understand how the overcharging has occurred
PA
He added: "Although the sums involved per person are small, it is quite shocking that so little care seems to have been taken to get this right in the first place, rather than fix it after people have been over-taxed."
Pensioners seeking refunds must contact HMRC directly rather than receiving automatic reimbursement. Unlike typical overpayment situations where taxpayers can reduce their bill the following year, this error does not qualify for such treatment.
Those filing self-assessment returns can manually correct the pre-filled state pension figures, while PAYE customers disputing amounts shown on their P800 must get in touch with HMRC to update their records.
Antonia Stokes, senior manager at the Low Incomes Tax Reform Group, said: "We have long been concerned that the calculation of the annual taxable state pension figure is difficult to understand and places far too much reliance on taxpayers performing their own calculations to arrive at the necessary figure, or to verify the amount pre-populated by HMRC."
She urged HMRC to "proactively seek to correct any overcharged tax".
This latest blunder adds to a growing list of failures at the tax authority.
Last year, MPs on the public accounts committee accused HMRC of "damaging trust in the tax system" after customer service levels hit record lows. Data showed only 66.4 per cent of callers managed to reach an adviser, with average waiting times stretching beyond 23 minutes.
The department has defended its performance, pointing to improvements through expanded online services and the recruitment of thousands of additional staff to clear backlogs.
Earlier this month, HMRC was also found to have overcharged workers after employees altered tax codes based on projected savings interest.
Despite these mounting difficulties, Angela MacDonald, the deputy chief executive overseeing customer service and compliance, was recognised in Friday's King's Birthday Honours.
