State pension WIN as HMRC to refund 3.2 million retirees after tax scandal - are you eligible?

Thank you for subscribing!

Some £19million will be handed back to state pensioners who were overcharged by the tax authority

Some 3.2 million retirees are set to receive tax rebates from HM Revenue and Customs (HMRC) after being overcharged on their state pension for more than 15 years.

The refunds, which average roughly £6 per person and amount to an estimated £19million in total, will be backdated to the 2020-21 tax year.

The miscalculation, brought to light by The Telegraph, affected individuals who paid income tax on their state pension, with millions subjected to inflated charges since 2010.

Under HMRC's own rules, the calculation should apply one week at the previous year's lower rate and 51 weeks at the current year's higher rate, reflecting the brief gap between the start of the tax year and the Monday when new pension rates take effect.

Instead, HMRC had been taxing some retirees on 52 weeks at the elevated rate, relying on figures supplied by the Department for Work and Pensions (DWP).

This approach resulted in a marginally inflated tax bill each year, compounding across millions of pensioners over more than a decade and a half.

HMRC has declined to issue refunds for the period between 2010 and 2020, insisting that pensioners who believe they were overcharged during those years must supply their own evidence.

Writing to MPs on the Treasury select committee, HMRC chief executive John-Paul Marks stated: "If customers believe they were affected in earlier years and have the necessary evidence, they can ask HMRC to review their position. These requests will be considered on a case-by-case basis."

Although HMRC has corrected the issue going forward for retirees whose tax is deducted automatically, the problem persists for those filing through self-assessment.

Pre-populated figures in 2025-26 tax returns remain overstated for some pensioners, despite efforts to implement a fix since last autumn.

The amounts owed per year are modest, on average £1.76 for those on the full basic state pension and £2.30 for those receiving the full new state pension.

Higher earners stand to reclaim more, with additional-rate taxpayers on the new state pension entitled to as much as £8.42 for 2023-24.

Rebates will be delivered via tax code adjustments, Self-Assessment credits, or cheques where needed. The entire refund process is not expected to conclude before March 2027.

Mr Marks added: "I am sorry that this error occurred and recognise the impact on affected customers.

"We will also conclude an internal audit review, ensuring the lessons are identified and applied in future."