{"id":127120,"date":"2026-10-17T07:00:00","date_gmt":"2026-10-17T06:00:00","guid":{"rendered":"https:\/\/en.econostrum.info\/uk\/?p=127120"},"modified":"2026-10-17T00:22:47","modified_gmt":"2026-10-16T23:22:47","slug":"hmrc-refunds-188-million-to-pension-savers","status":"publish","type":"post","link":"https:\/\/en.econostrum.info\/uk\/hmrc-refunds-188-million-to-pension-savers\/","title":{"rendered":"HMRC Refunds \u00a3188 Million to Pension Savers As Thousands Receive \u00a33,470 on Average"},"content":{"rendered":"\n

HM Revenue and Customs (HMRC) refunded approximately \u00a3188 million to pension savers during the 2025\/26 financial year after excessive tax deductions were made from private and workplace pension withdrawals. More than 54,000 repayments<\/strong> were processed, with affected taxpayers receiving an average of around \u00a33,470.<\/p>\n\n\n\n

The figures highlight an ongoing problem with the way income tax is initially calculated on certain pension withdrawals. Under the Pay As You Earn (PAYE<\/strong>) system, a single payment can be treated as recurring monthly income, resulting in deductions that exceed the tax ultimately owed.<\/p>\n\n\n\n

More Than 54,000 Pension Tax Refunds Processed in One Year<\/strong><\/h2>\n\n\n\n

According to City AM, which obtained the figures through a Freedom of Information request, HMRC processed 54,166 pension withdrawal repayments during the 2025\/26 financial year. The tax authority received 107,880 refund claims <\/strong>over the same period, with approximately half resulting in repayments.<\/p>\n\n\n\n

The refunds were distributed across several categories of pension withdrawals, reflecting differences in how savers accessed their retirement funds.<\/p>\n\n\n\n

The largest share, \u00a3124.5 million, was returned through more than 37,000 claims i<\/strong>nvolving individuals who had withdrawn only part of their pension savings<\/strong>. Another \u00a351.8 million went to taxpayers who had emptied their pension pots but continued receiving income from other sources.<\/p>\n\n\n\n

A further \u00a310.8 million was refunded to people who had withdrawn their entire pension pots and had no other taxable income apart from their state pension.<\/p>\n\n\n\n

The overpayments arise from the application of emergency tax codes when pension savers make their first taxable withdrawal. HMRC’s system can calculate deductions as though a one-off payment <\/strong>will continue every month.<\/p>\n\n\n\n

For example, someone withdrawing \u00a310,000 could initially be taxed on the assumption that they will receive the same amount monthly, rather than as a single payment. Former pensions minister Steve Webb, now a partner at consultancy LCP, criticised the arrangements.<\/p>\n\n\n\n

\u201cThe whole system of overtaxing people on pension withdrawals and expecting them to fill in one of three different claim forms to get their tax back is absurd<\/em>,\u201d he told City AM<\/a>. Webb argued that deducting basic-rate tax initially would be more appropriate for most savers<\/strong>, with any additional liability collected through the year-end assessment process.<\/p>\n\n\n\n

\"\"
Pension savers refunded after emergency tax rules led to overpayments. \u00a9Canva<\/em><\/figcaption><\/figure>\n\n\n\n

How Pension Savers Can Reclaim Overpaid Tax From HMRC<\/strong><\/h2>\n\n\n\n

Taxpayers who believe they have overpaid tax on pension withdrawals can request a refund directly from HMRC<\/a> rather than waiting for their annual tax position to be reviewed. The appropriate claim form depends on the individual’s circumstances.<\/p>\n\n\n\n

Form P55<\/strong> applies to eligible savers who have withdrawn part of their pension pot without emptying it. Form P53Z is intended for those who have withdrawn their entire pot but have other taxable income. Form P50Z<\/strong> covers people who have emptied their pension pots, stopped working and have no other taxable income apart from their state pension.<\/p>\n\n\n\n

Savers can submit claims through the official GOV.UK website. Applications require a National Insurance number, details of the pension withdrawal, the tax deducted and information about expected income during the tax year.<\/p>\n\n\n\n

Under current rules, private pensions can generally be accessed from age 55, rising to 57 in April 2028. Savers can typically withdraw 25% tax-free, subject to a maximum of \u00a3268,275. HMRC says eligibility for a refund depends on individual circumstances and whether the correct amount of tax was deducted. Those who do not submit an immediate claim will generally have their tax position reviewed after the financial year ends.<\/p>\n","protected":false},"excerpt":{"rendered":"

Thousands of pension savers have received unexpected refunds from HMRC after paying too much tax on withdrawals. With \u00a3188 million returned in just one financial year, the figures expose a problem that could affect other taxpayers.<\/p>\n","protected":false},"author":10,"featured_media":127127,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[29],"tags":[],"class_list":["post-127120","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-taxation","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\/127120","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\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/comments?post=127120"}],"version-history":[{"count":2,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/127120\/revisions"}],"predecessor-version":[{"id":127128,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/127120\/revisions\/127128"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/media\/127127"}],"wp:attachment":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/media?parent=127120"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/categories?post=127120"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/tags?post=127120"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}