Overview
- The problem was disclosed after a Telegraph Money investigation and confirmed by HMRC in a letter to MPs that apologised for the mistake.
- A 2010 PAYE systems change caused HMRC to apply 52 weeks at the higher State Pension rate instead of the correct split of 51 weeks at the new rate and one week at the prior rate, which led to repeated small overcharges.
- HMRC says about 1.4 million PAYE pensioners were overtaxed in 2024-25 and that up to 955,000 self-assessment and 760,000 simple-assessment pensioners may also have been affected for the same year.
- The tax office reports it collected more than £2 million in extra tax in 2024-25 with average overpayments of roughly £1.76–£2.30 per person and it has not pledged to issue automatic refunds; affected pensioners must contact HMRC to seek repayment.
- Tax experts have criticised HMRC’s handling and warned that the tiny per-person sums add up at scale, and Parliament’s Public Accounts Committee has been notified as the authority prepares its summer software fix.