Millions of older people across the UK have been left paying more tax than they should after HMRC admitted to a calculation error affecting pension income, according to the Mirror.
The tax authority confirmed that errors in the way some pension payments were processed meant retirees were charged more than the rules allow. The shortfall has not been returned automatically in every case, leaving many people unaware they are owed money.
The problem is linked to the way emergency tax codes are applied when someone draws money from a pension pot for the first time. HMRC treats the initial withdrawal as if it were the start of a regular income, which can push the saver into a far higher bracket than their real annual earnings would warrant.
Campaigners and money experts have raised concerns for years that the system effectively forces pensioners to act as their own auditor. To get the overpaid tax back, savers normally have to fill in one of three forms, known as P55, P53Z or P50Z, depending on how they accessed the cash.
Figures cited by the Mirror suggest the sums involved run into hundreds of millions of pounds, with average refunds often stretching into four figures. Anyone who took a flexible drawdown payment in recent years is being urged to check old statements and tax codes for any sign of an overcharge.
The blunder lands at a difficult moment for retirees. The personal allowance remains frozen at £12,570, which means more state pension recipients are being dragged into paying income tax for the first time as their payments rise with the triple lock.
Financial advisers say the safest step is to log in to a personal tax account through GOV.UK, compare the figures with payslips from any pension provider and contact HMRC directly if numbers do not match. Refunds, where due, are usually paid within a few weeks of a claim being approved.
HMRC said it is working through the affected records and that anyone who has been overcharged will receive what they are owed in full.