Overview

• HMRC processed 15,274 claims for overpaid pension taxes between January and March 2025, issuing refunds totaling over £44 million.
• The average refund for pensioners overtaxed on one-off withdrawals was nearly £3,000 per claim during this period.
• The PAYE system’s use of emergency tax codes on lump-sum pension withdrawals has led to widespread overpayment issues, with cumulative refunds exceeding £1.4 billion.
• A new automated tax coding system introduced this tax year aims to prevent future overtaxation and simplify the refund process for retirees.
• Experts caution that official refund figures likely understate the full scale of the problem, as many pensioners rely on lengthy end-of-year reconciliations to reclaim overpaid taxes.