Labour knew more than 8 million pensioners were being overtaxed but fa | UK | News
A shocking income tax miscalculation has resulted in 8.7 million pensioners being overcharged on their state pensions. The bug is said to have accumulated a whopping £43.5 million over 12 months and has yet to be resolved.
Pensioners were overcharged by roughly £5, but what’s worse is that Labor allegedly knew about it all this time. Pensions Minister Torsten Bell confirmed this was the case. He admitted that the government had been aware of the issue since at least June last year.
Mr Bell said: “A small subset of clients receiving state pensions [there has been] a calculation error”
The row arises from an apparent mismatch between official HMRC guidelines and the actual data used to determine the tax burden on millions of pensioners.
According to the tax office’s own regulations, the taxable state pension amount must be based on a single week at the previous year’s reduced rate, followed by 51 weeks at the updated level.
This particular calculation is designed to account for the short gap between the start of a new tax year and the first Monday when pension payments finally start to increase.
Instead HMRC was caught overtaxing pensioners by charging the top rate for 52 weeks, blindly relying on figures provided by the Department for Work and Pensions.
A former HMRC employee who identified the discrepancy believes the problem may have persisted since the 2023-24 tax year. Tax expert Mike Warburton, who first drew attention to the problem in May, said the situation pointed to a serious failure within the Government. Mr Warburton said: “We have two government departments at odds with each other and potentially the entire pensioner population is being overcharged. They have taxed pensioners more than the law requires, which is to the detriment of taxpayers. I think HMRC has put itself in a huge hole.”
Robert Salter, director of tax consultancy Blick Rothenberg, said many of those affected were unlikely to notice the discrepancy themselves. Mr Salter said: “You’ll assume it’s true. Let’s be honest, almost no one will double-check it. The bigger problem is that this tax is significant, especially for people on relatively low incomes. It’s money you can spend that HMRC have no legal right to have.”
Until last month, pre-filled tax returns for the 2025-26 tax year were still showing incorrect numbers. When questioned in Parliament in September last year, Chancellor of the Exchequer Dan Tomlinson said “most pensioners are paying the right amount of tax in real time”. He suggested that “affected individuals can call HMRC to correct inaccurate figures for their state pension.”
An HMRC spokesman said: “We apologize to those affected by this error and are working quickly to rectify the issue, but the impact is small with the difference in tax owed being around £5 in most cases.” Official sources stated that the problem is expected to be resolved by the end of this summer.
