{"id":111309,"date":"2025-08-02T13:15:00","date_gmt":"2025-08-02T12:15:00","guid":{"rendered":"https:\/\/en.econostrum.info\/uk\/?p=111309"},"modified":"2025-08-02T12:28:56","modified_gmt":"2025-08-02T11:28:56","slug":"hmrc-48-7-million-pensioners-overpayment-tax","status":"publish","type":"post","link":"https:\/\/en.econostrum.info\/uk\/hmrc-48-7-million-pensioners-overpayment-tax\/","title":{"rendered":"HMRC Refunds \u00a348.7 Million to Pensioners After Overpayment of Tax"},"content":{"rendered":"\n

Thousands of pensioners across the UK are currently receiving tax refunds from HMRC after overpaying tax on their pension income. Between April 1 and June 30 of this year, the tax authority has issued a total of \u00a348.7 million in refunds, with pensioners receiving an average of nearly \u00a33,800 each. The refunds stem from the way HMRC calculates tax on pension income, which has led to inaccuracies in the tax amounts owed. <\/p>\n\n\n\n

According to Devon Live<\/a><\/strong>, the issue persists despite efforts to address it, as pensioners often face overpayment of tax due to the monthly calculation method used by HMRC.<\/p>\n\n\n\n

The Issue Behind Pensioners’ Tax Overpayments<\/h2>\n\n\n\n

HMRC calculates tax on pension income using a method called the “month one” calculation. This method assesses a pensioner\u2019s income in their first month of retirement and then applies that figure across the entire tax year. However, this can lead to overpayment of tax, especially when pensioners take large lump sum withdrawals instead of regular monthly payments. <\/p>\n\n\n\n

The problem arises because HMRC assumes that pensioners’ monthly income remains the same throughout the year, leading to overtaxation when lump sums are involved.<\/p>\n\n\n\n

If pensioners take a lump sum early in the year, HMRC mistakenly calculates their tax as though they are receiving that lump sum every month, which results in an overpayment of tax.<\/p>\n\n\n\n

How Much Money Has Been Refunded?<\/h2>\n\n\n\n

During the second quarter of 2025, HMRC processed 12,767 <\/strong>repayment claims, totaling \u00a348.7 million<\/strong>. This equates to an average refund of just under \u00a34,000<\/strong> per pensioner. This increase in refunds highlights the ongoing issue of pensioners overpaying tax due to the flawed tax calculation system<\/a>. For the year to date, refunds have reached nearly \u00a392 million<\/strong>.<\/p>\n\n\n\n

Jon Greer, head of retirement policy at Quilter<\/a>, told GB News:<\/p>\n\n\n\n

\n

“The latest pension flexibility statistics reveal HMRC\u2019s is still fighting the scourge of pension tax overpayment despite streamlining the process of providing updated tax codes for people who are new to receiving a private pension, from the current tax year.”<\/p>\n<\/blockquote>\n\n\n\n

This statement underscores that despite improvements, the problem persists, especially for newly retired pensioners.<\/p>\n\n\n\n

How to Claim a Refund<\/h2>\n\n\n\n

Pensioners who believe they have overpaid tax can claim their refund using one of the following forms: P55<\/strong>, P53Z<\/strong>, or P50Z<\/strong>. The form needed will depend on each individual\u2019s circumstances. For example, pensioners who have withdrawn a lump sum may need to fill out P55<\/strong> to receive a refund, while others may need to use the other forms based on their situation.<\/p>\n\n\n\n

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown<\/strong>, advised pensioners to ensure they fill out the correct form:<\/p>\n\n\n\n

\n

“If you do get clobbered with a big tax bill, then you will need to fill out one of three forms so that HMRC can process the refund. Otherwise, you can wait until the end of the tax year.”<\/p>\n<\/blockquote>\n\n\n\n

Additionally, HMRC provides a free online tool that pensioners can use to check if they are due for a refund and understand how to claim it.<\/p>\n\n\n\n

Process Changes to Address Overpayment of Tax<\/h2>\n\n\n\n

In April 2025, HMRC introduced new processes to streamline tax calculations for pensioners, particularly for those new to receiving a private pension. These updates aimed to prevent pensioners from overpaying tax by ensuring more accurate tax codes. <\/p>\n\n\n\n

However, the increase in refunds over the past quarter\u2014an additional \u00a34 million<\/strong> compared to the previous three months\u2014indicates that overpayment of tax is still a significant issue.<\/p>\n\n\n\n

Jon Greer explained that even with the changes, pensioners continue to face challenges:<\/p>\n\n\n\n

\n

“A total of 12,767 repayment claims were processed in the second quarter of the year, totalling \u00a348,701,927, and around \u00a392m for the year to date.”<\/p>\n<\/blockquote>\n\n\n\n

This statement reflects how the issue of pension tax overpayment persists despite HMRC’s best efforts to improve the system.<\/p>\n","protected":false},"excerpt":{"rendered":"

HMRC has refunded millions to pensioners after they overpaid tax on their pension income. Between April and June, nearly 13,000 claims were processed, with each pensioner receiving an average refund of \u00a33,800.<\/p>\n","protected":false},"author":9,"featured_media":111310,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[44],"tags":[],"class_list":["post-111309","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33","no-featured-image-padding"],"_links":{"self":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/111309","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/comments?post=111309"}],"version-history":[{"count":2,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/111309\/revisions"}],"predecessor-version":[{"id":111328,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/111309\/revisions\/111328"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/media\/111310"}],"wp:attachment":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/media?parent=111309"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/categories?post=111309"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/tags?post=111309"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}