HMRC has paid out £48.7 million in refunds for overpaid tax on pension withdrawals between April and June, with the average refund worth around £3,800
Linda Howard Money and Consumer Writer and Rory Poulter
04:00, 09 Dec 2025Updated 07:35, 09 Dec 2025
Helen Morrissey believes the numbers point to nearly 13,000 refund applications being dealt with(Image: ingwervanille via Getty Images)
New figures from HM Revenue and Customs ( HMRC ) reveal the tax authority handed back £48.7 million between April 1 and June 30 to people who had been stung for too much tax on pension withdrawals. Pensions expert Helen Morrissey believes the numbers point to nearly 13,000 refund applications being dealt with in that period, with punters getting back roughly £3,800 each on average.
The expert explained how people taking sums from their pension for the first time can get clobbered with excessive tax bills due to HMRC’s flawed computer system assuming identical monthly withdrawals – leaving retirees facing nasty surprise bills. But while the Hargreaves Lansdown retirement chief confirms the cash can be clawed back from HMRC, she warns it’s a proper ‘admin headache’ to sort out, reports the Daily Record.
Morrissey said: “The overpaid pension tax saga continues to drag on. In just three months, HMRC has repaid a whopping £48.7m to people who paid too much tax for simply accessing their pension. With an average refund of around £3,800, these refunds amount to a significant chunk of change.”
More than 13,000 tax refund forms were processed earlier this year.(Image: Getty Images/iStockphoto)
She highlighted the cruel catch facing pension newcomers, saying: “The problem hits people who are taking a lump sum from their pension for the first time. They get taxed on what is known as a ‘month 1’ basis, which means it’s treated as though the same amount will come out every month. This results in a far bigger tax bill, which can come as an unpleasant surprise or even de-rail people’s retirement plans.”
The retirement expert further explained: “The money can be reclaimed. HMRC processed close to 13,000 forms between the beginning of April and the end of June, but it’s an admin headache that people can well do without. Ten years on from the advent of Freedom and Choice it’s a process that should have been consigned to history.”
(Image: andresr via Getty Images)
Ms Morrissey also offered advice on how to dodge an unexpected tax bill. She advised: “There are things you can do to mitigate it. For instance, you could make your first pension withdrawal a relatively small one. However, if you were looking to take a lump sum to fund travel or home renovations, for instance, you will need to plan ahead to make sure the money you take isn’t whittled away by tax which could delay your plans.
“If you do get clobbered with a big tax bill, then you will need to fill out one of three forms so that HMRC can process the refund. Otherwise, you can wait until the end of the tax year.”