Pension savers reclaimed £44.1 million in over-taxation on pension withdrawals in the first three months of 2026, the latest HM Revenue and Customs figures show.
In its pension schemes newsletter, HMRC said there were 13,942 reclaim forms processed during the quarter, with an average reclaim of £3,165.
In total, around £1.6 billion has now been reclaimed by people overtaxed on pension withdrawals since 2015.
Tom Selby, director of public policy at AJ Bell, said: “The fact HMRC is still yet to address one of the enduring flaws in its approach to taxing those who choose to flexibly access their pension pots means many are forced to take matters into their own hands to be reunited with their money.”
Selby said the figures are likely to only scratch the surface, as they only capture those who fill in the relevant HMRC reclaim form and many will be reliant on HMRC putting their affairs in order after the end of the tax year.
Since 2015, HMRC has chosen to tax the first flexible withdrawal someone makes in a tax year on an emergency ‘month 1’ basis. This often results in an overpayment of tax, landing savers with unexpected bills.
HMRC has moved to offer some respite to those who take a regular drawdown income. From April 2025, the Government improved its tax code process so people are moved from an emergency code to paying the right amount of tax more quickly.
However, Selby said that doesn’t help those taking a one-off withdrawal, who will continue to be overtaxed.
One way savers planning to take a single withdrawal in a tax year can potentially avoid the shock of a big overtaxation bill is by taking a notional withdrawal first. This should mean HMRC is able to apply the correct tax code to the second, larger withdrawal.
Alternatively, people can fill out one of three HMRC forms and should receive their tax back within 30 days.
“Savers frustrated by this tiresome process will be less than impressed by the Government’s move to leverage inheritance tax on pensions, which may also result in the need for tax refunds in some cases.
“Once the convoluted process proposed by government is implemented in April 2027, some beneficiaries may find they overpay income tax in the process and will need to claim a refund, heaping yet more fiddly admin on taxpayers,” Selby added.
