Retirees across the UK may be entitled to a £3,815 tax refund from HMRC, after a longstanding systemic overtaxation issue affected those making flexible pension withdrawals.
Thousands of claimants have already recovered significant sums, and more could qualify through a straightforward reclaim process.
Recent data reveal that in April to June 2025, pensioners reclaimed £49 million in overpaid taxes, with an average refund of £3,815 per claim.
Nearly 13,000 reclaim forms were processed during that quarter alone. The cumulative amount reclaimed since 2015 now exceeds £1.5 billion.
This error largely stems from HMRC’s “emergency tax coding” system, which often treats a one-off withdrawal as though it will recur monthly, triggering higher withholding than necessary.
How the Overtaxation Works
HMRC’s emergency tax system automatically assumes large pension withdrawals will continue throughout the year, placing the recipient on a high tax band rate immediately. This method, known as “Month 1 / emergency coding,” can lead to overpayment of income tax.
The problem disproportionately affects retirees who take one or occasional lump-sum withdrawals, since regular pensioners typically have stable monthly income and correct tax codes from the start.
Who Qualifies & How Much You Can Claim
| Category | Detail / Threshold |
|---|---|
| Typical refund per claim | £3,815 (average) |
| Total reclaimed in Q2 2025 | £49 million |
| Number of claims processed (Q2) | ~13,000 |
| Cumulative total since 2015 | ~£1.5 billion |
| Claim window | For years where overtaxation occurred |
| Refund timeframe | Usually within 30 days after HMRC processes claim |
Anyone over 55 who made flexible withdrawals from private or defined contribution pensions could be eligible — especially if they were taxed as though that withdrawal was a recurring monthly income.
How to Get Your £3,815 Refund: Step-by-Step
- Check your pension withdrawals and tax records
Review your pension statements and notice any large lump sums or one-off payments in a tax year. - Claim using the correct HMRC form
Use Form P53 (or P53Z in certain cases) to request repayment of overpaid tax on pension withdrawals. - Submit supporting documentation
Include details like P45 / P60s, pension provider statements, and your National Insurance number. - Receive refund in ~30 days
In many cases, HMRC processes the claim quickly, and funds are issued by cheque or bank transfer. - If you didn’t claim, HMRC may rectify end of year
In some scenarios, HMRC will adjust your tax position at year end, correcting overpayments automatically. - Avoid future overtaxation
Use a notional small withdrawal first (coded as “month 1”) so HMRC applies a more accurate tax code to larger subsequent withdrawals.
Risks & Considerations
- Many eligible pensioners never file a claim, leaving money unclaimed.
- If your pension provider forces you to take a large lump sum, you may require the full refund claim process to correct overtaxation.
- Always double-check tax documentation and withdrawal methods to ensure accuracy.
The £3,815 average HMRC payout for affected pensioners highlights a serious flaw in the emergency tax coding system that has persisted for years.
For those who withdrew lump sums and received excessive tax withholdings, one simple claim may unlock a substantial refund — one that many retirees would welcome with relief.
If you suspect you were overtaxed, review your pension withdrawals, complete the appropriate claim form, and reclaim what is rightfully yours. Don’t leave money on the table.
FAQs
Who can claim the £3,815 average refund?
Pensioners who made flexible withdrawals from defined contribution or private pensions and were taxed under HMRC’s emergency coding system may qualify.
How long will it take to get the refund?
Typically, once HMRC receives your completed claim form, the refund is processed within 30 days.
Will HMRC automatically adjust my tax if I don’t claim?
In some instances, HMRC may correct overpayments at the end of the tax year, but many pensioners do not receive full recovery without submitting a formal claim.