HM Revenue and Customs (HMRC) has admitted a significant administrative error that could result in around 1.7 million pensioners being overcharged on their tax returns.
The mistake affects pensioners who complete self‑assessment forms, including those with more complex financial affairs such as self‑employed workers and buy‑to‑let landlords.
HMRC’s online system had been automatically inserting state pension income based on 52 weeks at the new pension rate — despite the tax authority’s own guidance requiring a different calculation.
Under HMRC rules, pensioners must declare one week of state pension at the previous year’s rate and 51 weeks at the newly increased rate.
The discrepancy arose because data supplied by the Department for Work and Pensions (DWP) was calculated differently from HMRC’s legal requirements for self‑assessment reporting.
The correct method is set out in HMRC’s published guidance, which instructs pensioners to enter one week at the old rate followed by 51 weeks at the updated rate introduced after the annual uplift.
This reflects how entitlement accrues across the tax year.
However, the pre‑populated figures on HMRC’s online system instead multiplied the new weekly rate across all 52 weeks, inflating the total pension income shown on some returns.
HMRC apologises over self-assessment error affecting 1.7 million pensioners
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Pensioners submitting forms without correcting the figure could therefore have paid slightly more tax than required.
The issue was first spotted by tax expert Mike Warburton, former director at Grant Thornton, while reviewing his own online return.
Steve Webb, partner at pension consultants LCP, said the situation was troubling given HMRC’s own guidance clearly set out the correct calculation.
He said: “The way the state pension is taxed is a regular source of confusion, but it is worrying that HMRC seem to have been getting it wrong themselves.”
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Pensioners submitting forms could have paid slightly more tax than required
| GETTY“HMRC’s guidance notes correctly instruct taxpayers to enter one week at the previous year’s rate and 51 weeks at the new rate, but the system had been automatically inserting a higher figure.”
He urged pensioners completing self‑assessment returns to check the state pension amount shown before submitting their forms.
“HMRC need to fix this, and meanwhile individuals filing their tax return should make sure they have not been taxed on a figure that is slightly too high.”
HMRC has apologised for the error but said the financial impact on most taxpayers would be small.
An HMRC spokesman said: “We apologise to those affected by this calculation error, although the impact is small with the difference in tax owed being around £5 in most cases.”
The tax authority confirmed pensioners who believe the pre‑populated figure is wrong can manually amend it before filing.
Those who have already submitted their return and suspect they have overpaid can contact HMRC to request a repayment.
The self‑assessment deadline is January 31 each year, giving affected pensioners time to check and correct any inaccurate figures.
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