Millions of pensioners are being overcharged on their tax bill by HMRC.
Up to 8.7m pensioners have been charged around £5 more on their tax bill, meaning as much as £43.5 million was collected last year in error.
HMRC is aware of the overcharging issue and said it has been working since last year to put it right. It is aiming to introduce a fix later this summer, it said.
An HMRC spokesperson said: “We apologise to those affected by this error and are working at pace to fix the issue, although the impact is small with the difference in tax owed being around £5 in most cases.”
The Sunday Times reported that the issue was raised with HMRC in August, but that it did not alert the Department of Work and Pensions (DWP) until October.
The error came because HMRC failed to account for the annual rise in state pension under the triple lock, which guarantees an increase of average earnings, the highest figure of inflation or 2.5 per cent.
The new state pension for 2025/26 was £230.25 a week, up from £221.20 in 2024/25. That means state pension income was recorded at £9.05 higher than it should have been.
As a result, tax would increase by £1.81 for basic-rate tax payers, £3.62 for higher tax payers and £4 for additional rate taxpayers.
HMRC has said those affected paid an average of £5 more.
This miscalculation affected pensioners who pay income tax via self-assessment and those who are still in employment who pay via Pay As You Earn (PAYE).
Conservative MP Richard Holden raised the error in August later year in a parliamentary question to Dan Tomlinson, who as exchequer secretary to the Treasury is the minister responsible for HMRC. Mr Tomlinson later said that most pensions do pay “the right amount of tax in real time.”
Although HMRC is working to fix the issue, the shadow chancellor has called for the taxman to reveal how many pensioners have been affected and to start actively issuing refunds.
Sir Mel Stride told The Times: “If HMRC have been charging millions of pensioners too much tax then questions need to be answered and the matter must be urgently put right.
“Ministers need to ascertain what has happened and what action is being taken to ensure these sorts of errors do not happen again.”
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