Hundreds of thousands of state pensioners and individuals receiving Carer's Allowance are being urged to take immediate action to review their tax details, following a fresh alert from HM Revenue and Customs (HMRC).
Failure to ensure records are up-to-date could result in an unexpected and potentially significant tax bill at the end of the financial year.
Why Tax Codes Are Crucial for Benefit Claimants
Like many other Department for Work and Pensions (DWP) benefits, both the state pension and Carer's Allowance are subject to income tax. This means that if HMRC does not have the correct information about your income from these sources, your tax code may be wrong, leading to you paying either too much or too little tax throughout the year.
In a recent reminder, an HMRC spokesperson emphasised that every taxpayer is responsible for ensuring their own tax code is accurate. They stated this can be managed "quickly and easily" via the HMRC app or an online tax account.
Finance expert Grace Hardy, CEO of Hardy Accounting, highlighted that those on taxable benefits are particularly vulnerable. "If the claimant is in receipt of a taxable benefit – such as Carer's Allowance or the state pension – and this isn't accounted for in their tax code, it is possible they could be paying too little tax," she warned. "They may end up with an extra bill at the end of the tax year as a result."
How the State Pension Interacts with Your Tax-Free Allowance
The core issue stems from the interaction between the state pension and the personal allowance, which is the amount you can earn each year before paying income tax. For the 2025/26 tax year, this threshold is £12,570.
The full new state pension is currently £11,973 per year, just £597 below this tax-free limit. However, if you have additional income from work, a private pension, or other sources, your total annual income may exceed the personal allowance. In such cases, HMRC will typically adjust your tax code to collect the tax due on your state pension from your salary or other pension payments.
HMRC guidance confirms this process: "If we can collect all the tax due this way, we'll do it by changing your tax code. You don't need to do anything." Despite this, experts strongly advise individuals to proactively check that this adjustment has been made correctly.
When You Must Check Your Tax Code
Grace Hardy outlined several key life events that should always trigger a tax code check to prevent errors. These include:
- Starting or leaving a job.
- If your income changes or you have more than one income.
- Earning over £100,000.
- Starting or stopping receipt of a taxable benefit like Carer's Allowance.
- Your pension starting or stopping.
- After any major life event affecting your income or health.
Your current tax code can be found on the Government's website or the HMRC app, and a tool on GOV.UK helps explain what each code means.
If you discover a discrepancy, Ms Hardy advises identifying who is responsible. "If the tax code is incorrect, it will likely be HMRC's error; if the error surrounds benefit entitlement or payment amount, this will likely be the DWP's responsibility," she said. Claimants can contact HMRC directly to resolve issues or seek help from an accountant.
Taking a few minutes to verify your details now could save you from a stressful and costly surprise later.
