Thousands of taxpayers have been warned they could be left worse off following a tax error acknowledged by HMRC.

The error could leave self-employed workers without National Insurance-related benefits like the full state pension.

The issue relates to voluntary Class 2 National Insurance contributions, a payment that can be made by self-employed taxpayers with profits under £6,725.

The contributions are usually paid by taxpayers as part of their self-assessment return and must reach HMRC by the January 31 deadline, following the end of the tax year.

HMRC then transfers the contributions to the person’s National Insurance record allowing it to be counted towards their entitlement for state pension and other benefits.

However, the Low Income Tax Reform Group (LITRG) warned that an error has left thousands potentially worse off, after the HMRC did not initiate the transfer until after January 31.

The LITRG warned that in some cases that meant contributions of up to £163.80 were rejected and refunded automatically.

It means that taxpayers could miss out on a qualifying year of contributions, reducing their possible state pension claims later in life.

An HMRC spokesperson said: "We apologise to those affected and are working to resolve this issue as a matter of urgency."

Antonia Stokes, LITRG's technical officer, said: "This appears to be an unfortunate error by HMRC that may impact certain low-income self-employed workers who have tried to keep their entitlement to NI-related benefits up to date in the 2022/23 tax year.

"The issue is unique to the year in question, and our advice to those who might be affected is to first check to see whether they have received a refund from HMRC.

"If they have, or if the taxpayer is unsure, they should contact the NICs helpline to determine their position and, if necessary, make a special payment directly to them."