Thousands of people in the UK reclaimed money from HMRC after being overtaxed on flexible pension withdrawals in early 2026. Official figures show more than £44 million was repaid between January and March, with the average refund rising year over year.
The latest data highlights continuing issues linked to emergency tax codes applied to pension withdrawals. Financial experts say the size of repayments suggests that while fewer people may be affected, those who are caught by the system are losing larger sums before corrections are made.
People accessing pension savings flexibly can face unexpected tax deductions because HMRC often applies emergency tax codes to initial withdrawals. According to figures released by HMRC and reported by the Labour Party, 13,942 approved claims were processed during the first quarter of 2026.
In total, HMRC repaid more than £44.1 million during the three-month period. The average repayment reached just over £3,160, reflecting an increase of nearly 10% compared with the previous year.
Average Repayments Increase as Pension Tax Issues Continue
The figures prompted renewed criticism of how emergency tax is applied to pension withdrawals. Adam Cole, retirement specialist at Quilter, said the growing size of repayments was becoming a more significant issue than the number of affected individuals.
“The real shift is not the number of people affected, but the size of the mistakes being made,” Cole said, according to the reported comments. He added that larger repayment values mean retirees can be left temporarily out of pocket while waiting for HMRC to return funds.
The issue commonly affects people making flexible withdrawals from defined contribution pensions. Emergency tax codes are often used when a first withdrawal is processed, which can result in individuals being taxed as though they will continue withdrawing the same amount every month for the rest of the tax year.
According to Tom Selby, director of public policy at investment platform AJ Bell, changes introduced by the government from April 2025 were designed to improve the speed at which people are moved from emergency tax codes to the correct tax position.
Selby said individuals making only one withdrawal in a tax year may reduce the risk of significant overtaxation by first taking a small “notional withdrawal,” such as £1, before withdrawing larger sums.
He also noted that people who believe they have been overtaxed can submit one of three HMRC repayment forms and may receive refunds within 30 days. If no claim is made, HMRC says adjustments should be completed at the end of the tax year.
HMRC Clarifies Pension Age Transition Rules Before 2028 Changes
Alongside the repayment data, HMRC released additional guidance concerning planned changes to the Normal Minimum Pension Age (NMPA), which is set to rise from 55 to 57 on April 6, 2028.
The updated clarification confirmed that transitional arrangements will apply to some individuals who accessed pension benefits before the rule change takes effect. According to HMRC, people aged 55 or 56 before April 2028 who have already started receiving certain pension benefits will continue receiving payments without interruption after the minimum age rises.
The guidance specifically covers people who have designated pension funds, purchased an annuity, or started a scheme pension before the deadline. These payments will continue to qualify as authorized benefits under the new rules. HMRC also stated that any additional pension benefits crystallized after April 5, 2028 will generally require the individual to have reached age 57, unless a protected pension age or another exception applies.
