HMRC has confirmed that it is knowingly overcharging millions of pensioners on their tax bills due to a calculation mistake. The tax authority collected as much as £43.5 million last year by increasing the bills of up to 8.7 million pensioners who pay income tax by about £5 each.
HMRC Acknowledges the Error
A spokesperson for HMRC stated: “We apologise to those affected by this calculation error and are working to fix the issue, although the impact is small with the difference in tax owed being around £5 in most cases.”
Political Reactions
Sir Mel Stride, the Conservative shadow chancellor, commented: “If HMRC have been charging millions of pensioners too much tax then questions need to be answered and the matter must be urgently put right. Ministers need to ascertain what has happened and what action is being taken to ensure these sorts of errors do not happen again.”
Richard Holden, Conservative MP, first raised the error in a parliamentary question last year. Tomlinson acknowledged the mistake on September 10, stating that “most pensioners pay the right amount of tax in real time.” He added: “HMRC has become aware that for a subset of individuals in receipt of the state pension, a calculation error means that their tax is calculated based on 52 weeks at the new rate. The difference in tax owed is approximately £5. Affected individuals can call HMRC to amend any incorrect figures of state pension.”
Expert Criticism
Sir Steve Webb, former pensions minister and partner at LCP, said: “It seems remarkably careless to tax potentially millions of pensioners on the basis of the wrong state pension figure. Most people will not have a clue as to the rules around the taxation of the state pension but you would hope that HMRC would know and apply the rules correctly. Although the sums involved per person are small, it is quite shocking that so little care seems to have been taken to get this right in the first place, rather than fix it after people have been over-taxed.”
Antonia Stokes, senior manager at the Low Incomes Tax Reform Group, added: “We have long been concerned that the calculation of the annual taxable state pension figure is difficult to understand and places far too much reliance on taxpayers performing their own calculations to arrive at the necessary figure, or to verify the amount pre-populated by HMRC. We would urge HMRC to work quickly to rectify errors in the pre-populated state pension information included in taxpayers records, and proactively seek to correct any overcharged tax.”
