HMRC has admitted overtaxing 1.4 million pensioners after a 15-year error stemming from a 2010 system change, prompting an apology from its chief executive to affected individuals and MPs. The Labour government's tax arm said the mistake came to light after an investigation by Telegraph Money, leading to John-Paul Marks, chief executive of HMRC, apologising in a letter to MPs for the error that has caused pensioners to be overcharged since 2010-11.
Scale of the Overcharging Issue
Mr Marks stated that approximately 1.4 million pensioners in PAYE paid too much tax in 2024-25 because of the issue, up from 1.17 million in 2023-24 and 762,000 in 2022-23. Additionally, up to 955,000 pensioners in self assessment and 760,000 in simple assessment may have overpaid tax in 2024-25 due to the wrong state pension figure being used in HMRC's calculations. Mike Warburton, The Telegraph’s tax columnist who revealed the problem in May, commented: "There seems to be a state of chaos in HMRC over this issue and it is pensioners who are being left confused and overtaxed."
Impact on Pensioners
Jon Greer of investment company Quilter noted: "While the amounts involved appear relatively small at an individual level, the fact it has affected so many people means it may have unfairly topped up government coffers." He added: "While HMRC says it is working on a solution to prevent the issue from happening again, it falls short of saying it will repay those affected automatically, because it falls within their administrative tolerances. Pensioners who believe they may have overpaid will need to take matters into their own hands and contact HMRC directly."
Financial Details and Apology
Mr Marks said the issue had cost basic rate taxpayers receiving the full basic state pension £1.76 a year on average between 2021-22 and 2024-25, and £2.30 for those on the full new state pension. He stated: "I apologise for this error and especially to those pensioners who have been affected. I know that any shortfall matters, particularly to customers on fixed or limited incomes. I would like to reassure the committee that HMRC is taking this issue very seriously and we are working at pace to put in place a solution." An HMRC spokesman added: "We’re confident most state pensioners won’t be affected, and for those that are, the impact is small, with the difference in annual tax paid only a few pounds in most cases."
