Committee publication · Correspondence · 7 July 2026

Correspondence from HMRC on State Pensions taxation, dated 1 July 2026

Summary

HMRC has identified a historical error in State Pension calculations used in tax reconciliations since 2010, affecting over 3 million pensioners. The error stems from a 2010 PAYE systems change that incorrectly used 52 weeks of current-year State Pension rates instead of one week at the previous year's rate and 51 weeks at the current year's rate. Most affected pensioners fall within administrative tolerances, but around 1.4 million PAYE pensioners in 2024/25 overpaid tax, averaging £1.76 to £2.30 annually.

Key findings

Historical error in State Pension tax calculations originated in 2010 PAYE systems change and subsequently affected Self Assessment pre-population (from 2015/16) and Simple Assessment (from 2016/17)
In 2024/25 alone: 1.4 million PAYE pensioners overpaid; up to 955,000 Self Assessment pensioners potentially affected; around 760,000 Simple Assessment pensioners affected
Most overpayments fall within HMRC's longstanding administrative tolerances (underpayments under £49.99 not pursued; overpayments under £9.99 not automatically repaid), meaning many pensioners were not materially disadvantaged
Average overpayment for basic-rate taxpayers: £1.76 (basic State Pension) to £2.30 (new State Pension) per tax year between 2021/22 and 2024/25
HMRC committed to delivering a corrected solution by summer 2026 for future tax years, including correction of 2025/26 PAYE and Simple Assessment calculations and enablement of Self Assessment return amendments

Tone

Procedural

Topics

public-financetaxationpensionsadministrative-error

Key actors

John-Paul Marks, Dame Meg Hillier, HM Revenue & Customs (HMRC), Department for Work and Pensions (DWP), Low Incomes Tax Reform Group (LITRG), Chartered Institute of Taxation, Comptroller and Auditor General

Notable line

“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.”

Key Quotes

“An incorrect State Pension figure has been used in PAYE end-of-year reconciliations and has fed through into Self Assessment pre-population information and Simple Assessment calculations.”
— John-Paul Marks · Explaining the nature and scope of the error

“… for the majority of pensioners these differences do not result in a change to the tax collected or repaid because they fall within HMRC's longstanding administrative tolerances”
— John-Paul Marks · Describing the mitigation effect of administrative tolerances

“In the 2024/25 tax year, around 1.4 million pensioners in PAYE paid too much tax because of this issue.”
— John-Paul Marks · Quantifying the scale of overpayment in the most recent tax year

“This stems from a PAYE systems change introduced in 2010, where the full requirements relating to the correct calculation approach were not implemented.”
— John-Paul Marks · Identifying the root cause of the error

“I can confirm that we will deliver a solution this summer to correct future tax calculations.”
— John-Paul Marks · Outlining HMRC's timeline for remedying the issue

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Source · parliament.uk record ↗