Tens of thousands of taxpayers received money back from HMRC last year after their pension withdrawals were overtaxed. In the 2025/26 financial year, HMRC processed 54,166 pension withdrawal repayments, totalling approximately £188 million, according to figures obtained via a Freedom of Information request.
The overtaxation stemmed from default Pay As You Earn (PAYE) rules, which can treat a single pension withdrawal as monthly income. This often happens because pension providers may not hold an up-to-date tax code for customers. Savers must actively apply for these refunds, as HMRC does not issue automatic repayments.
HMRC received 107,880 repayment claim forms during the financial year, with roughly half of these claims resulting in a payout. The majority of the refunded money, £124.5 million, was claimed through P55 forms for partial withdrawals. An additional £51.8 million was paid out from P53Z forms, and £10.8 million from P50Z forms.
Steve Webb, a partner at pensions consultant LCP and former pensions minister, described the requirement for savers to file a form to recover overpaid tax as “absurd” and a significant burden for both the department and taxpayers.