The HMRC State Pension Tax Error That Pensioners Shouldn’t Ignore

What Is the HMRC State Pension Tax Error?

The error relates to the way HMRC calculated annual taxable State Pension income following increases to weekly pension rates.

State Pension payments generally increase each April. For people whose State Pension started on or after 6 April 2010, the standard calculation for a full tax year generally includes one week at the previous pension rate and 51 weeks at the new, increased rate.

However, HMRC incorrectly calculated certain pensioners’ annual income using 52 weeks at the increased rate. This resulted in taxable State Pension income being overstated, potentially causing some individuals to pay more Income Tax than required.

The mistake affected calculations involving PAYE, Self Assessment and Simple Assessment. Importantly, it concerned the pension income figures used for tax purposes, rather than necessarily indicating that the Department for Work and Pensions (DWP) had paid the wrong pension amount.

Source: GOV.UK – How your State Pension is taxed.

How Much Tax Could Pensioners Have Overpaid?

The amount of any overpayment depends on the difference between the old and new weekly State Pension rates, the individual’s tax band and their other sources of income.

For example, suppose a pensioner’s weekly State Pension increased from £220 to £230.

In this example, the potential tax overpayment would be £2 for the year.

However, an overstated pension figure does not automatically mean tax was overpaid. The actual outcome depends on the individual’s overall tax position, available allowances and how HMRC handled the difference.

Source: HMRC’s September 2026 update to Parliament

Who Could Be Affected by the HMRC State Pension Tax Error?

According to HMRC’s July 2026 findings, the estimated impact for the 2024/25 tax year included:

These figures do not necessarily represent separate groups of individuals, and not everyone identified will be entitled to a refund.

Pensioners receiving income from other sources may particularly benefit from checking their tax records. This includes those receiving workplace or private pensions, employment income, rental income or other taxable earnings. If you have several sources of taxable income, our guide to handling Self Assessment with multiple income sources explains what you need to consider.

Individuals who complete Self Assessment returns should also check their reported State Pension income, especially where figures were automatically populated by HMRC.

HMRC State Pension Tax Error Latest Update for 2026

In a letter dated 3 September 2026, HMRC outlined the action being taken, including changes to its tax calculation systems and the review of earlier tax years.

The main developments include:

• 25 August 2026: HMRC implemented a system correction to ensure future PAYE and Simple Assessment annual reconciliations use the correct State Pension figures.
• September 2026: HMRC planned corrections to pre-populated pension figures for 2025/26 Self Assessment returns, including adjustments where returns had already been submitted.
• 2020/21 onwards: HMRC confirmed an automatic correction exercise to identify affected taxpayers and address overpayments.
• 2026/27 financial year: HMRC expects most corrections and repayments to be completed during this period.

For tax years before 2020/21, individuals who believe they were affected may request a review, subject to HMRC’s assessment of the circumstances and supporting evidence.

Source: HMRC’s official letter dated 3 September 2026

How Will HMRC Refund Overpaid State Pension Tax?

For individuals taxed through PAYE, the correction may be reflected in an adjustment to their tax code, reducing the amount of tax collected from employment or private pension income.

Those who submit Self Assessment returns may receive a credit to their tax account, while other affected taxpayers may receive repayments directly through HMRC’s repayment arrangements.

Most importantly, pensioners covered by HMRC’s automatic correction exercise for 2020/21 onwards generally do not need to submit a separate refund claim. HMRC intends to identify affected records and arrange corrections without requiring individual applications.

Nevertheless, pensioners should review any revised calculations or repayment notifications to confirm that the amounts are accurate.

How to Check Whether You Have Paid Too Much State Pension Tax

Although HMRC is taking steps to correct affected records automatically, reviewing your own tax position can help identify discrepancies that may otherwise go unnoticed.

1. Check Your State Pension Statement

Start by locating your annual State Pension increase letter from the Department for Work and Pensions. This should provide details of your weekly pension entitlement and any changes following the annual increase.

Compare the amount shown with the State Pension income recorded by HMRC for the relevant tax year.

2. Review Your Tax Calculations

Check your PAYE tax calculations, P800 notices, Self Assessment returns or Simple Assessment letters, where applicable.

Pay particular attention to the annual State Pension figure HMRC has used. For a full tax year where the standard calculation applies, the amount would generally reflect one week at the previous rate and 51 weeks at the increased rate.

Remember that taxable State Pension income is generally based on the amount you were entitled to receive during the tax year, which may differ from the payments deposited into your bank account.

3. Look for Corrections or Refund Notifications

HMRC has started implementing corrections and expects most repayments to be processed during the 2026/27 financial year.

Review any correspondence, tax code notices or changes to your tax account to see whether a correction has been made.

4. Contact HMRC if You Find a Discrepancy

If your records suggest that your State Pension income was overstated, or you believe the error affected earlier tax years, contact HMRC for clarification.

You may also wish to seek professional advice, particularly if you receive income from several sources or have submitted Self Assessment returns over multiple years.

Source: GOV.UK – Tax overpayments and underpayments

Does Everyone Receiving a State Pension Pay Income Tax?

State pension income is taxable, but not everyone receiving it pays income tax. For 2026/27, the standard Personal Allowance is £12,570, meaning pensioners whose total taxable income falls below their available allowance may have no tax to pay.

Those receiving additional income from employment, private pensions or rental properties may have a tax liability. As tax is not deducted directly from state pension payments, HMRC generally collects it through other taxable income or a separate assessment.

With the State Pension set to rise again in April 2027, it’s also worth understanding how the 2027 State Pension increase could affect your Income Tax.

Sources: GOV.UK – Income Tax rates and Personal Allowances

Could You Have Overpaid State Pension Tax?

The HMRC State Pension Tax Error may involve relatively small amounts for individual pensioners, but that doesn’t mean it should be overlooked.

While HMRC is correcting affected records and arranging repayments, it’s still worth checking whether your State Pension income has been accurately reported, particularly if you receive income from other sources.

If you’re unsure whether the error has affected you or notice something unusual in your tax calculations, feel free to contact us for professional advice. We can help you review your tax position and understand whether any further action is needed.