HMRC error leaves millions of pensioners owed tax refunds

An error by HMRC has resulted in millions of pensioners potentially being owed tax refunds. Approximately 3.2 million individuals are affected, with total repayments estimated at around £19.3 million.

The mistake occurred during the calculation of annual state pension income. While calculations should account for pension increases by using the previous rate for one week and the increased rate for 51 weeks, some HMRC calculations applied the higher rate to all 52 weeks. This overstated the annual income figure and led to excessive tax collection.

The correction exercise covers cases from the 2020/21 tax year onwards. Most affected pensioners will not need to apply for refunds, as HMRC intends to issue repayments automatically through PAYE adjustments, Self Assessment credits, or other appropriate payment methods.