Around 1.7 million pensioners could risk paying too much tax, due to an administrative error from HMRC.
This issue affects those who fill out a self-assessment tax return, with the mistake potentially seeing pensioners overcharged tax by £5. Although this is small sum, the tax office is telling pensioners to check their tax returns carefully before the self-assessment deadline on January 31 2027.
Here, Which? explains how to check whether you’ve paid too much tax, what to do if the figure on your tax return is wrong, and what upcoming changes to state pension tax could mean for you.
Why could you be paying too much tax?
The issue only affects a small proportion of the 13.2 million people receiving the state pension, specifically those who also complete a self-assessment tax return.
You don’t usually need to fill in a self-assessment tax return if your income only comes from the state pension, workplace pensions or savings interest, as HMRC can usually collect any tax owed automatically.
However, if income is more complex – for example, if you’re self-employed or get income as a buy-to-let landlord – you need to fill in a self-assessment tax return.
As part of your tax return, you need to include your state pension income. Under HMRC rules, this should be worked out using 51 weeks at the current year’s state pension rate and one week at the previous year’s rate.
To make the process easier, HMRC pre-populates this figure on tax returns. However, it has been using 52 weeks at the higher current-year rate instead. This slightly inflates your taxable income and could leave you paying too much tax.
HMRC 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.
‘Anyone who believes the amount of state pension shown on their tax return is incorrect can amend the figure before submitting their return, and anyone who believes they have overpaid tax can request a repayment.’
- Find out more: how much is the state pension?
What to do if you’re affected
If you are yet to file, you should not assume the state pension figure HMRC has provided is correct, and you should cross-check it against your DWP uprating letter. This was sent before the start of the tax year, telling you your new weekly rate for the 2026-27 tax year.
If the figure is wrong, you can manually overtype it on your self-assessment form before the January 31 deadline.
If you have already submitted your return and believe you have overpaid, you can amend your return online or contact HMRC directly to request a refund.
If you have a private pension, your provider usually deducts the tax for both your private and state pensions from your private pension payments through your tax code. So when filling in your self-assessment tax return, you still list the state pension in its own section as a gross overall figure.
Steve Webb, partner at pension consultants LCP, said: ‘The way the state pension is taxed is a regular source of confusion, but it is worrying that HMRC seem to have been getting it wrong themselves.
‘For pensioners who have to file an annual tax return, they need to check what figure has been included for state pension. HMRC need to fix this, and meanwhile individuals filing their tax return should make sure they have not been taxed on a figure that is slightly too high.’
- Find out more: state pension age calculator
How to check you’re paying the right tax
Paying tax on the state pension can be confusing because tax isn’t deducted directly from your DWP payments. Instead, if your total income goes above your personal allowance, any tax due is usually collected through your tax code from a workplace or private pension.
The personal allowance is currently £12,570. The full new state pension is still below this level, although next year’s increase is expected to exceed this.
If you are receiving the state pension, here are three checks you can make to ensure you are paying the right amount of tax:
- Check your total income: Add together all your taxable income including your state pension, private pensions, earnings, savings interest and rental income. Using an income tax calculator can help you estimate how much tax you should pay and spot any unexpected changes.
- Look at your tax code: Keep an eye on the tax code on your private pension or payslip (it usually looks like 1257L or a variation like 357L). It’s your job to make sure your tax code is correct, so if it is different to what you expected, then it could be wrong. Take a look at what it means, then report it to HMRC, who can then correct it.
- Understand simple assessments: If you don’t have a private pension for HMRC to collect tax from, but your income goes over the personal allowance, HMRC may send you a simple-assessment tax calculation after the tax year ends. These are usually sent between June and August. If you think the calculation is wrong, you normally have 60 days to challenge it.
Top tip: The easiest way to verify all of this is to log into your HMRC Personal Tax Account online. It shows exactly what income HMRC thinks you have and what tax code they are applying.
- Find out more: should I top up my state pension?
Simple-assessment tax changes from 2027
In the Autumn Budget 2025, the government confirmed that pensioners who only receive the state pension will not pay income tax from April 2027. This change was made because the state pension is nearing the £12,570 tax-free limit.
The new full state pension rose to £241.30 per week – or £12,547.60 a year – in April 2026, and is now only £22.40 away from the personal allowance. Next year’s increase is set to push it over the threshold.
The exemption will only apply if the state pension is your only source of taxable income. If you receive additional taxable income, such as from a workplace pension, private pension or rental property, you may not qualify under the current proposals. Final details are expected later this year.
However, analysis by pension consultants LCP suggests relatively few pensioners will benefit. The firm estimates that around 700,000 pensioners – roughly, one in 18 people receiving the state pension – would qualify.
LCP estimates that someone wholly dependent on the new state pension would save around £88 in 2027-28, £153 in 2028-29 and £220 in 2029-2030.
LCP said the government’s plans leave several gaps that could mean many pensioners still end up paying tax.
- The old state pension system is excluded: None of the 8.1million people on the old state pension will qualify for this tax break. Their basic pension is only £9,614, which is well under the personal allowance. Many of these people also get top-ups like Serps or S2P. Even if their total pension is the same amount as the new state pension, they will still have to pay tax because they aren’t ‘solely dependent’ on the basic amount.
- Most people on the new state pension won’t benefit: Out of the five million people on the new system, 80% will be ineligible as most have other income from private pensions or investments that push them over the limit. Others miss out because they receive ‘protected payments’ from the old system, or their pension is too low to reach the tax threshold anyway.
- The ‘cliff edge’ problem: The report says the current plan creates a ‘steep cliff-edge’ for those with other savings. If you have just £1 of other income, you could lose the entire exemption. This means you would pay tax on that single pound plus your entire state pension.
- Small private pots could trigger tax: If you cash out a small private pension, the 75% taxable portion counts as extra income. Under the current rules, this means you are no longer ‘solely’ dependent on the state pension and would lose your tax-free status.
In response, HM Treasury said: ‘Anyone whose only income is the full new or basic state pension without any increments will not pay income tax, and we are committed to that over this parliament.
‘By keeping the triple lock, 12 million pensioners will see their income rise by up to £470 this year, and they continue to benefit from the highest personal allowance in the G7.’
