Retirees reclaiming larger pension tax refunds

Newsletter issue – August 2026

New HMRC figures show large refunds reclaimed in early 2026. Thousands of retirees reclaimed money after being overtaxed on flexible pension withdrawals.

HMRC repaid £44.1m between January and March, with 13,942 approved claims processed in that period. The average repayment exceeded £3,160, up nearly 10% from the previous year.

Emergency tax codes remain the core problem. When they are applied to initial flexible withdrawals, they then continue to cause unexpected and excessive deductions for retirees, taxing the withdrawal as if it were monthly income for the rest of the tax year.

Experts have highlighted a shift in the issue - while fewer people may be affected, those who are caught by the system are losing larger sums up front. The government's plan to make pensions subject to inheritance tax could push more people to withdraw large lump sums which may increase emergency tax incidents even further.

HMRC has announced an overhaul of emergency pension tax processes, promising faster refunds, but higher-rate charges will still occur.