UK pensioners are being strongly encouraged to check whether they have overpaid tax on their pension withdrawals and claim back potentially significant sums from HM Revenue and Customs (HMRC). This call to action follows the revelation that HMRC refunded a substantial £46.2 million to pension savers between October and December 2025 alone.
A Decade-Long Issue with Pension Taxation
The push for more pensioners to come forward comes against a backdrop where an estimated £1.5 billion has been refunded overall to individuals who were overtaxed on flexible pension withdrawals since the pension freedoms were introduced over ten years ago. The core of the problem lies in the system used to tax these withdrawals.
When accessing the tax-free 25% portion of a pension pot, pension providers often operate without full knowledge of an individual's tax code or other income details. This information gap can lead to the application of an emergency tax code, resulting in substantial overpayments that the saver must later reclaim.
Three Key Forms for Reclaiming Overpaid Tax
HMRC has established three specific forms for pensioners to use depending on their circumstances. Identifying and completing the correct form is crucial for a successful claim.
- Form P55: This form is designed for individuals who have not withdrawn their entire pension pot and are not taking regular pension payments. It is the appropriate route for those making one-off or irregular withdrawals.
- Form P53Z: Pensioners should complete this form if they have withdrawn all funds from their pension and also receive other taxable income from sources such as employment or investments.
- Form P50Z: This is the correct form for those who have fully withdrawn their pension pot but have no other taxable income whatsoever.
According to HMRC, individuals who submit one of these forms should typically receive their refund within 30 days. Those who do not proactively claim will have their tax position corrected by HMRC at the end of the tax year, but this involves a much longer wait for the owed money.
Expert Criticism and Practical Advice
Tom Selby, director of public policy at investment platform AJ Bell, has been vocal in his criticism of the current system. He stated, "As a result of this confusing approach, many are forced to take matters into their own hands to be reunited with their hard-earned money."
Selby emphasised that despite a decade passing since the pension freedoms began, HMRC has yet to resolve this fundamental flaw in taxing flexible access. He also warned that the official refund figures "likely only barely scratch the surface" as they only account for those who actively complete a reclaim form, missing many who wait for an automatic year-end correction.
Strategies to Avoid Overtaxation
For savers planning their withdrawals, Selby offered practical advice to potentially avoid the issue altogether. "One way savers planning to take a single withdrawal in a tax year can potentially avoid the shock of a big overtaxation bill is by taking a notional withdrawal first," he explained.
This small, initial withdrawal allows HMRC to establish the correct tax code, which can then be applied to a subsequent, larger withdrawal, preventing overpayment from the outset. The alternative remains the proactive submission of the relevant HMRC form to secure a refund after the fact.
The ongoing scale of these repayments underscores a significant administrative issue within the pension system, highlighting the importance for retirees to understand their rights and the processes available to reclaim what is rightfully theirs.
