Are you paying the right amount of tax on your state pension?

Millions of pensioners may have overpaid tax, or could be at risk of doing so, because of an HMRC administrative error.

The issue affects both pensioners who complete self-assessment tax returns and those who are still working and pay tax through PAYE. HMRC says the error dates back to the 2010-11 tax year and could have affected millions of pensioners. 

HMRC is looking into the matter and has urged pensioners to check their tax returns carefully before the self-assessment deadline on 31 January 2027.

Here, Which? explains how to check whether you've paid too much tax, what to do if the figures on your tax return are incorrect, and what upcoming changes to state pension tax could mean for you.

How the error happened 

HMRC admitted the error in a letter to the Public Accounts Committee (PAC) following an investigation by The Telegraph earlier this year. 

Currently, around 8.7 million state pension recipients pay income tax, including an estimated 1.7 million who complete a self-assessment tax return each year.

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.

The mistake dates back to a PAYE systems change introduced in 2010. HMRC says it has affected PAYE tax calculations since 2010-11, self-assessment tax returns since 2015-16 and simple assessments since 2016-17.

• Find out more: how to fill in a self-assessment tax return

How many pensioners are affected?

HMRC confirmed that 1.4 million pensioners paying tax through PAYE paid too much tax because of this issue in 2024-25. It also said up to 955,000 pensioners completing self-assessment tax returns and around 760,000 receiving simple assessments had an incorrect state pension figure used in their tax calculations and may, as a result, have paid too much tax.

However, HMRC stressed this doesn't necessarily mean everyone with an incorrect calculation paid the wrong amount of tax. It said many cases fall within its longstanding policy of not collecting very small underpayments or automatically repaying very small overpayments.

John-Paul Marks, HMRC's chief executive, said: 'This means the existence of a discrepancy in the underlying calculation does not necessarily mean that a customer has actually paid the wrong amount of tax overall.

'I apologise for this error and especially to those pensioners who have been affected. I know that any shortfall matters, particularly to customers on fixed or limited incomes.

'I would like to reassure the committee that HMRC is taking this issue very seriously and we are working at pace to put in place a solution.'

• Find out more: how much is the state pension?

How much have state pensioners overpaid?

For 2025-26, the full new state pension rose to £230.25 a week from £221.20 the previous year. As a result of HMRC's error, some pensioners' taxable income was recorded as £9.05 a year higher than it should have been.

HMRC estimates the mistake cost basic-rate taxpayers receiving the full basic state pension £1.76 a year on average between 2021-22 and 2024-25, rising to £2.30 a year for those receiving the full new state pension.

In 2024-25 alone, HMRC collected around £2m in excess tax from affected pensioners, with the average overpayment worth around £2.

HMRC says it will fix the error this summer so that tax calculations for 2025-26 are correct. It will also, where necessary, correct self-assessment returns that have already been submitted for 2025-26.

• Find out more: the state pension age is about to rise – when will you qualify?

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 31 January 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.

HMRC says customers who think they have paid too much tax can contact its PAYE or self-assessment helplines, write to HMRC explaining their circumstances or, where possible, amend their tax return. It says vulnerable and digitally excluded customers will receive additional support where needed.

Refund requests can be made through HMRC’s official channels, including its website and customer support services. HMRC has not yet announced an automatic refund programme for everyone affected.

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.

• 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 ways you can check you're paying the right amount of tax: 

1. 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. 
2. Check 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 from what you expected, then it could be wrong. Take a look at what it means, then report it to HMRC so it can correct it. 
3. 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 in to 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 expected 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 8.1 million 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.'

• Find out more: people relying solely on the state pension will not pay income tax