New figures from HMRC reveal that pensioners making flexible withdrawals are frequently overcharged tax, with repayments averaging nearly £4,000 per person. In the second quarter of 2026, HMRC refunded a total of £50,353,656.76 to those affected.
Emergency tax code triggers overpayments
The overcharging occurs because HMRC applies an emergency tax code, assuming a single withdrawal will be repeated monthly. This artificially inflates expected annual income, potentially pushing savers into higher-rate tax brackets. For example, a £10,000 withdrawal could be taxed as if the individual's annual income were £120,000.
Adam Cole, retirement specialist at Quilter, said: “HMRC’s latest figures show that between April and June 2026 more than 12,500 people had to reclaim tax after accessing their pension flexibly, with more than £50.3million repaid in the second quarter of the year.” He noted that while the number of reclaim forms submitted had fallen slightly compared with the same period in 2025, the total refunded amount had increased by around £2million.
Reclaim process and forms
Anyone who has made a single pension withdrawal is advised to check if they have overpaid tax. To claim a refund, individuals must complete one of three forms: P55, P53Z, or P50Z. The P55 form is for those who have only flexibly accessed part of their pension pot. The P53Z is for those who have withdrawn all their pension and receive other taxable income. The P50Z is for those who have withdrawn all their pension and have no other taxable income.
Between April 1 and June 30, HMRC processed 10,200 P55 forms, 2,001 P53Z forms, and 411 P50Z forms.
System 'still fixing errors'
Tom Selby, director of public policy at AJ Bell, suggested that savers planning a single withdrawal could avoid over-taxation by taking a notional withdrawal first, allowing HMRC to apply the correct tax code to the second, larger withdrawal. However, thousands of pensioners continue to overpay.
Adam Cole added: “PAYE was designed for predictable monthly earnings, not ad hoc pension withdrawals, and as a result it continues to generate avoidable overpayments that have to be corrected after the fact. All of this is happening at a time when tax pressure on retirees is increasing. With the personal allowance frozen until April 2031 and the state pension taking up a growing share of it, more people are being dragged into tax. When flexible pension withdrawals are then layered on top, emergency tax becomes more likely and more costly. HMRC has improved the speed of repayments, but these figures show the system is still fixing errors rather than preventing them.”
HMRC said: “Ultimately, nobody overpays tax as a result of taking advantage of pension flexibility. We will repay anyone who pays too much because they’re on an emergency tax code, and individuals can claim a repayment much earlier if they wish.”
