Thousands of pensioners across the UK have claimed back more than £10,000 from HMRC after being overcharged tax on their pension withdrawals, according to new data.

A handful of people were given a refund worth more than £100,000.

It comes as HMRC figures, which were obtained by Royal London through a freedom of information (FOI) request, show an increase in the number of refunds claimed in 2023-24.

Pension freedoms, which came into force from 2015, gave over-55s a range of options over how to use their defined contribution (DC) pension pot.

Do Pensioners pay tax?

Generally, people can take up to 25% of their pension as a tax-free lump sum, and the remaining 75% is taxed as income.

However, an “emergency” rate is applied to pension withdrawals, with HMRC assuming it will be the pensioner’s monthly income for the rest of the tax year.

This means that people could be overcharged if they make one-off withdrawals.

HMRC issues emergency tax refunds to thousands of pensioners

Around 60,000 pension savers claimed refunds in the 2023-24 tax year, 20% more than the roughly 50,000 the previous year, Royal London’s analysis showed.

About 11,700 pensioners claimed back £5,000 or more, including 2,400 who were given refunds in excess of £10,000.

The average refund was worth £3,342, which was £280, or 9%, more than 2022-23.

The top 25 refunds averaged at £106,900, according to the data.

Clare Moffat, pension expert at Royal London, said: “It’s incredible to think that some people withdrawing from their pension for the first time were entitled to emergency tax refunds in excess of £100,000.

“Not only do these taxes usually come as a massive shock, the unexpected tax amount can also scupper people’s carefully laid plans.

“HMRC recently announced an overhaul of its emergency taxing codes on pensions, which it promises will deliver quicker refunds, but that doesn’t mean people won’t still be charged the higher rate in the first place.”

What Are Your Refund Rights?

From April, HMRC changed its process so that tax codes are automatically updated for individuals newly receiving a private pension.

In total, about £1.4 billion has been refunded since 2015, the figures revealed.

A spokesman for HMRC commented: “Ultimately, nobody overpays tax as a result of taking advantage of pension flexibility.

“We will repay anyone who pays too much because they’re on an emergency tax code and individuals can claim a repayment much earlier if they wish.”

How do I claim emergency tax back on my pension?

GOV.UK explains you can claim back any tax owed on a pension lump sum using a P53 form if you have taken:

all of your pension as cash — trivial commutation of a pension fund

a small pension as a lump sum

However, you will need to use form P53Z instead if:

you’re reclaiming tax because you’ve flexibly accessed your pension pot and you’ve emptied your pension pot

received a serious ill health lump sums — to reclaim, in year, any overpaid tax on these lump sums

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Before you request a refund, you will need to tell the government about any other income you expect to get during the tax year, and check you have part two and three of all forms P45 from your pension payments.

GOV.UK adds: “We’ll not be able to deal with the claim without the P45.”

You can apply for a pension emergency tax refund on the GOV.UK website (a link to which can be found above.