HMRC error to trigger tax refunds for millions of pensioners

Approximately 3.2 million pensioners in the UK are expected to receive tax refunds following a calculation error by HMRC. The mistake resulted in overcharged taxes on state pensions, with total repayments estimated at roughly £19.3 million.

The error occurred because HMRC incorrectly used the higher, increased pension rate for all 52 weeks of the tax year, rather than accounting for the one week at the previous rate when pension increases take effect. This led to an overstatement of annual pension income in tax calculations.

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