HMRC pays back £44m in overpaid pension tax: are you owed a refund?

HMRC refunded £44.1m to pension savers between January and March 2026, new figures show. 

Taxpayers filed more than 13,900 reclaim forms over these three months after pension withdrawals were overtaxed at the emergency rate, resulting in an average refund of £3,100 per claim. 

The number of reclaims fell compared with the same period last year, when 15,000 forms were lodged. However, the average payout was lower last year sitting at £2,800.

Here, Which? explains why pensions are being overtaxed, how much has been overpaid and the ways you can claim a refund.

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How much has been overpaid?

A total of £44,139,097.55 was repaid from 1 January to 31 March, according to the latest data from HMRC. 

The data shows that 13,942 reclaim forms were processed during the quarter, with an average reclaim sitting at £3,160 – up by 10% year on year.

Since 2015, more than £1.6bn has been reclaimed by people overtaxed on pension withdrawals, with the milestone being passed in the Autumn of 2025. 

While the number of reclaim forms is down by around 9% compared with the same period last year, the total amount repaid overall has remained constant over the last 12 months.

• Find out more: what can I do with my pension savings?

Why are pensions overtaxed?

Those wanting to access their pension pot can do so in two ways. The first is to take an uncrystallised fund pension lump sum (UFPLS). You can take a 25% lump sum of your pension tax-free, and then the rest is charged at your normal income tax rate.

The second is to take a lump sum from a pension drawdown plan. If you do this, 25% of your total pension savings is tax-free and any subsequent withdrawals are subject to income tax.

Your pension company collects the tax on your behalf, so the lump sum you get is paid net of tax. However, many people overpay tax the first time they withdraw from their pension. This is because your provider may not know what your tax code is or details of other income, if you have any.

If your provider doesn't have this information, withdrawals are taxed using a higher-rate emergency tax code, calculated on what's known as a 'Month 1' basis.

This means you'll be taxed as though the lump sum you're withdrawing will be repeated every month. For instance, a £10,000 withdrawal could see you being taxed as though your annual income is £120,000. If this goes unnoticed, it can make an unnecessary dent in your pension pot.

• Find out more: what is a pension drawdown?

HMRC's tax code process

From April 2025, HMRC changed its process so that tax codes are automatically updated for individuals newly receiving a private pension. The change aims to make sure that, over the course of the year, you're taxed the correct amount. 

HMRC made the announcement in its Pensions Schemes Newsletter, published on 23 January 2025. It said it will inform those affected by letter or digitally that their tax code has been changed.

Tax issues with ad-hoc withdrawals

Investment firm AJ Bell warns that while the change will help some, those who make a single ad-hoc withdrawal from their pension may still be left out of pocket. 

One way savers planning to take a single withdrawal in a tax year can potentially avoid the shock of a big over-taxation bill is by taking a notional withdrawal first. 

Tom Selby, director of public policy added: 'This should mean HMRC is able to apply the correct tax code to the second, larger withdrawal.'

Since the change, thousands of pensioners continue to overpay. Adam Cole, retirement specialist at Quilter said: 'PAYE was designed for predictable monthly earnings, not ad hoc pension withdrawals, and as a result it continues to generate avoidable overpayments that have to be corrected after the fact.

'All of this is happening at a time when tax pressure on retirees is increasing. With the personal allowance frozen until April 2031 and the state pension taking up a growing share of it, more people are being dragged into tax. 

'When flexible pension withdrawals are then layered on top, emergency tax becomes more likely and more costly. HMRC has improved the speed of repayments, but these figures show the system is still fixing errors rather than preventing them. 

'Until pension taxation better reflects how people actually access their money in retirement, thousands of savers will continue to face unnecessary complexity and cashflow disruption.'

On pension taxation, HMRC said: 'Ultimately, nobody overpays tax as a result of taking advantage of pension flexibility. We will repay anyone who pays too much because they’re on an emergency tax code, and individuals can claim a repayment much earlier if they wish.'

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Could you be owed a pension tax refund?

If you are taking a steady stream of income via drawdown, you shouldn’t need to take any action as HMRC should adjust your tax code to ensure you pay the correct amount over the year. 

However, if you make a single withdrawal, it’s important to check you haven’t paid more than you should.

The process is relatively straightforward and can be done online via the government's tax refund website.

How to claim your refund

If you've overpaid tax, you'll need to fill out one of three claims forms:

P55

A P55 form should be used if you haven't withdrawn your entire pension pot and are not taking regular payments.

P53Z

A P53Z form should be completed if you have withdrawn all your pension and also receive other taxable income.

P50Z 

A P50Z form should be completed if you've withdrawn all your pension, but have no other taxable income. 

If you don't want to use the government's online service, you can fill out a form on-screen, print it off and post it to HMRC, or print off and fill in a form by hand. HMRC says you should receive a refund of your overpaid tax within 30 days.

The article was first published on 7 May 2023 and has been updated since to reflect HMRC's latest figures. Last update: 27 April 2026.