Brits given HMRC warning about pension tax overcharge | Personal Finance | Finance

Britons have been warned they could be paying too much tax on their state pension after HMRC admitted an error affecting around 1.7 million self-assessment returns. The issue relates to how the tax authority has pre-populated pension income figures for the 2025-26 tax year, potentially leaving some pensioners with higher tax bills than required.

HMRC guidance states that state pension income for tax purposes should be calculated using one week at the old pension rate and 51 weeks at the new rate following the annual increase linked to the triple lock. However, pension figures already entered into many online self-assessment forms were instead based on 52 weeks at the new rate after information was supplied by the Department for Work and Pensions (DWP).

The discrepancy was uncovered by former Grant Thornton tax director Mike Warburton, who noticed the figure in his own online tax return did not match HMRC’s published guidance.

After being contacted, HMRC told The Telegraph the figures had been pre-filled using data provided by the DWP, despite the tax authority maintaining that its own calculation method remained the legally correct one.

The department later acknowledged this amounted to an error and apologised to affected taxpayers.

An HMRC spokesman said: “We apologise to those affected by this calculation error, although the impact is small with the difference in tax owed being around £5 in most cases.”

The spokesman added that anyone who believes the state pension figure shown on their return is incorrect can amend it before submitting the form, while those who think they have already overpaid can request a repayment.

The row centres on the annual uplift to the state pension, which took effect at the start of the 2025-26 tax year in April. Pensioners typically receive a letter from the DWP outlining their new weekly entitlement after the increase comes into force.

HMRC guidance for the 2025-26 self-assessment process instructs pensioners to enter the amount they were “entitled to receive” between April 6 2025 and April 5 2026, rather than simply the number of payments received.

That calculation equates to one week at the previous rate and 51 weeks at the new higher rate.

Tax experts said the issue highlights confusion between government departments over how pension entitlement should be treated for tax purposes.

While the sums involved are relatively modest for most taxpayers, campaigners said pensioners should still check their returns carefully before submitting them. The error could particularly affect retirees who complete self-assessment returns because of additional income from savings, investments or private pensions.

HMRC has not indicated whether it will automatically correct the pre-populated figures already appearing in online returns.

Instead, taxpayers have been told to review the numbers themselves and make any necessary amendments before filing.

The tax authority said anybody unsure about the figures on their return should consult official guidance or seek professional advice before submitting their forms.

Express.co.uk has contacted HMT for additional comment.