Overview

• HMRC commonly applies an emergency tax code to a first flexible withdrawal, taxing it as if the same amount will be paid every month for the rest of the tax year.
• HMRC repaid about £44 million in the first quarter of 2025 to more than 15,000 people who were overtaxed on pension withdrawals, with average refunds of roughly £2,881.
• Advisers say making a small initial withdrawal, sometimes as little as £1 and often around £10–£100, can prompt HMRC to issue the correct code before a larger lump sum is taken.
• The tactic is not guaranteed, and some providers may require paperwork, so people might still need to reclaim using HMRC forms P55, P53Z or P50Z, with many refunds processed within around 30 days.
• Experts warn that taking taxable cash can trigger the Money Purchase Annual Allowance, cutting the future tax-relieved pension contribution limit to £10,000 a year.