Melanie Wright

HMRC has admitted that a long-running error means as many as 1.4m pensioners may have paid the wrong amount of income tax on their State Pension. The problem dates back to changes made to HMRC’s PAYE system in 2010. Since then, the department has been using an incorrect State Pension figure when calculating tax. The error also affects some self-assessment and simple assessment taxpayers. Here, we explain what went wrong and how to work out if you’re affected.

Pensions are due to come into the scope of inheritance tax for the first time in April 2027. Under current rules, your pension isn’t usually considered part of your taxable estate on death, although your beneficiaries may have to pay income tax on inherited pension savings if you’re aged 75 or over when you pass away.

Retirement is one of the biggest financial transitions most of us will ever make, yet many people reach their 50s or 60s without knowing how much income they’ll need or when they’ll be able to stop working. Although none of us can predict exactly what the future holds, taking some time to plan ahead can make a real difference.