Thousands claim back tax on pensions: are you owed a refund?

Thousands of pensioners have claimed back money after being overtaxed on pension withdrawals by HMRC, the latest figures show, with some people claiming back more than £100,000. 

Some 13,800 people claimed back up to £1,000, and around 2,400 people claimed back more than £10,000 in 2023-24, according to the data obtained by pensions investment company Royal London through a freedom of information (FOI) request.

Here, Which? explains why people were having to pay emergency tax on their retirement savings, how much was overpaid, how HMRC has changed the system, and the ways you can claim a refund.

How many people claimed back money?

According to official HMRC data, around 60,000 people claimed pension tax refunds in 2023-24, compared with approximately 50,000 the previous year—an increase of 21%. 

Of those, 11,700 pension savers claimed back £5,000 or more in emergency tax on their retirement income, 2,400 claimed sums in excess of £10,000, while 50 claimed back more than £16,000. 

The average refund per saver was £3,342, which is up £280 on the previous year. The average value of the top 100 claims was £38,465, while the top 25 refunds averaged an eye-watering £106,897. 

• 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.

Steve Webb, former pensions minister and partner at LCP, added: 'This new system should mean that far more people are quickly moved on to the correct tax code and no longer end up with an overpayment of tax. 

'The tax system is complex enough as it is, and this change should hopefully reduce the complications which pension savers face when they try to access their hard-earned cash.'

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.'

Tax issues with ad-hoc withdrawals

While these changes will help many pensioners, those who make a single ad-hoc withdrawal from their pension may still be left out of pocket, according to the investment firm AJ Bell.

Tom Selby, director of public policy, says: '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. 

'This should mean HMRC is able to apply the correct tax code to the second, larger withdrawal.'

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Could you be owed a pension tax refund?

If you're 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 to cover the data from Royal London's FOI request. Last update: 15 September 2025.