Thousands of individuals with pension savings are being advised to verify if they qualify for a tax refund from HMRC. Recent data reveals that over £50 million was reclaimed in taxes on pension withdrawals between April and June 2026, with more than 12,500 claims processed during this period, resulting in an average repayment of £4,000 per claimant.
If you were subject to emergency tax after your initial pension withdrawal, you might be eligible for a refund. This situation can arise when HMRC assumes your first withdrawal will be a recurring monthly payment, even if you do not make additional withdrawals within the tax year.
Typically, individuals can withdraw up to 25% of their pension tax-free starting at age 55, while the remaining 75% is subject to standard income tax rates. Adam Cole, a retirement expert at Quilter, emphasized the importance of these refunds, stating that the average repayment of nearly £4,000 is significant and could be utilized more effectively and promptly.
Instead of waiting for HMRC to refund the overpaid tax, individuals can claim the difference between the emergency tax paid and the regular tax owed by completing an online form. Alternatively, they can opt to receive the refund from HMRC at the end of the tax year. Cole highlighted the need for a tax system that aligns better with retirees’ actual financial needs to avoid unnecessary complications and financial disruptions.
Opting for careful financial planning and seeking professional advice are crucial steps to prevent overpaying taxes during pension withdrawals.