Committee publication · Correspondence · 6 July 2026
Letter from the Chief Executive and First Permanent Secretary at HMRC relating to State Pension taxation, 1 July 2026
Summary
John-Paul Marks, Chief Executive of HMRC, writes to inform the Public Accounts Committee of a historical error in State Pension taxation dating to 2010. HMRC used incorrect pension figures in PAYE reconciliations and Self Assessment calculations, affecting approximately 1.4 million PAYE pensioners in 2024/25 and up to 1.7 million others in Self Assessment and Simple Assessment. Most overpayments fell within HMRC's administrative tolerances (averaging £1.76–£2.30 per year for basic rate taxpayers), so actual tax collected often remained correct. HMRC commits to delivering a summer 2026 fix and has commissioned an internal audit.
Key findings
- HMRC used incorrect State Pension figures (52 weeks at current-year rate instead of one week at previous rate plus 51 weeks at current rate) in PAYE systems since 2010/11, Self Assessment pre-population since 2015/16, and Simple Assessment since 2016/17, stemming from a 2010 systems change.
- In 2024/25, approximately 1.4 million PAYE pensioners overpaid tax; up to 955,000 Self Assessment and around 760,000 Simple Assessment pensioners may have overpaid, with average losses of £1.76 (basic State Pension) to £2.30 (new State Pension) per tax year for basic rate taxpayers.
- For the majority of affected pensioners, discrepancies do not result in actual tax refunds because overpayments fall within HMRC's longstanding administrative tolerances (small overpayments not automatically repaid; small underpayments not pursued).
- HMRC will deliver a correction solution in summer 2026 to prevent future errors and correct 2025/26 calculations; will also enable Self Assessment returns filed for 2025/26 to be corrected.
- Internal Audit has been commissioned to establish the full history and causes of the issue and ensure lessons are learned; Low Incomes Tax Reform Group (LITRG) has been engaged to support development of the solution and provide challenge on customer support.
Tone
ProceduralTopics
Key actors
John-Paul Marks, Sir Geoffrey Clifton-Brown, 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.”
“… 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”
“2024/25 tax year, around 1.4 million pensioners in PAYE paid too much tax because of this issue.”
“I can confirm that we will deliver a solution this summer to correct future tax calculations.”
“The complexity of the interaction between DWP State Pension data, PAYE end- of-year reconciliation, Simple Assessment and Self Assessment pre-population means developing a solution has taken until now and I apologise that …”
Source · parliament.uk record ↗