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Join Which? MoneyHMRC pays back £48m in overpaid pension tax: are you owed a refund?
Since 2015, more than £1.5bn has been reclaimed by people overtaxed on pension withdrawals
HMRC refunded £48.5m to pension savers between July and August 2025, new figures show.
Taxpayers filed more than 13,700 reclaim forms over these three months after pension withdrawals were overtaxed at the emergency rate, resulting in an average refund of £3,500 per claim.
Compared to the same period last year, the number of forms submitted has risen from 12,331 – an increase of over 11%.
Here, Which? explains what's changing, how much has been overpaid and the ways you can claim a refund.
How much has been overpaid?
A total of £48,560,205 was repaid from 1 July to 30 September, according to the latest data from HMRC.
The data shows that 13,721 reclaim forms were processed during the quarter, with an average reclaim of £3,539.
Since 2015, more than £1.5bn has been reclaimed by people overtaxed on pension withdrawals.
- 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 improves 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. 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. Jon Greer, head of retirement policy at Quilter said: 'Although HMRC has made changes to speed up repayments, these figures show the underlying problem persists.
'The PAYE system was built for regular employment income, not one-off pension withdrawals, and it continues to cause unnecessary complexity for retirees.
'Part of the reason more retirees are feeling the sting of tax on their pension withdrawals is that the state pension now consumes a growing share of the personal allowance.
'With the allowance frozen and the state pension rising each year, many people are being dragged into the tax net. When they make flexible withdrawals to top up their income, a larger portion is now taxable, compounding the frustration when over-deductions occur.'
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.'
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: 3 November 2025.
