1000's of pensioners declare £10,000 every in overcharged tax

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Your assist makes all of the distinction. Learn extra About 2,400 pensioners efficiently reclaimed greater than £10,000 every after being overcharged tax on their pension withdrawals, new evaluation has revealed.

A small variety of individuals within the UK even obtained refunds exceeding £100,000.

The HMRC figures, which had been obtained by Royal London by way of a Freedom of Data (FOI) request, present a notable enhance within the variety of refunds claimed within the 2023-24 monetary 12 months.

Pension freedoms, which got here into pressure from 2015, gave over-55s a spread of choices over tips on how to use their outlined contribution (DC) pension pot.

Usually, individuals can take as much as 25 per cent of their pension as a tax-free lump sum, and the remaining 75 per cent is taxed as earnings.

Nonetheless, an “emergency” fee is utilized to pension withdrawals, with HMRC assuming it will likely be the pensioner’s month-to-month earnings for the remainder of the tax 12 months.

Because of this individuals could possibly be overcharged in the event that they make one-off withdrawals.

<img src="https://static.independent.co.uk/2025/07/29/11/34/iStock-1467014395.jpeg" srcset="https://static.independent.co.uk/2025/07/29/11/34/iStock-1467014395.jpeg?quality=75&width=320&crop=3%3A2%2Csmart&trim=0%2C0%2C0%2C0&auto=webp 320w, https://static.independent.co.uk/2025/07/29/11/34/iStock-1467014395.jpeg?quality=75&width=640&crop=3%3A2%2Csmart&trim=0%2C0%2C0%2C0&auto=webp 640w" loading="lazy" alt="The top 25 refunds averaged at £106,900" class="sc-1mc30lb-0 ggpMaE inline-gallery-btn"/> open picture in gallery

The highest 25 refunds averaged at £106,900 (Getty/iStock) Round 60,000 pension savers claimed refunds within the 2023-24 tax 12 months, 20 per cent greater than the roughly 50,000 the earlier 12 months, Royal London’s knowledge confirmed.

About 11,700 pensioners claimed again £5,000 or extra, together with 2,400 who got refunds in extra of £10,000.

The typical refund was price £3,342, which was £280, or 9 per cent, greater than 2022-23.

The highest 25 refunds averaged at £106,900, in line with the information.

Clare Moffat, pension skilled at Royal London, mentioned: “It’s unimaginable to assume that some individuals withdrawing from their pension for the primary time had been entitled to emergency tax refunds in extra of £100,000.

“Not solely do these taxes often come as an enormous shock, however the surprising tax quantity may also scupper individuals’s rigorously laid plans.

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“HMRC lately introduced an overhaul of its emergency taxing codes on pensions, which it guarantees will ship faster refunds, however that doesn’t imply individuals received’t nonetheless be charged the upper fee within the first place.”

<img src="https://static.independent.co.uk/2025/06/19/12/431a7c3bf94e3c0b4699b9ed7d280bacY29udGVudHNlYXJjaGFwaSwxNzUwNDE2NTMw-2.78982776.jpg" srcset="https://static.independent.co.uk/2025/06/19/12/431a7c3bf94e3c0b4699b9ed7d280bacY29udGVudHNlYXJjaGFwaSwxNzUwNDE2NTMw-2.78982776.jpg?quality=75&width=320&auto=webp 320w, https://static.independent.co.uk/2025/06/19/12/431a7c3bf94e3c0b4699b9ed7d280bacY29udGVudHNlYXJjaGFwaSwxNzUwNDE2NTMw-2.78982776.jpg?quality=75&width=640&auto=webp 640w" loading="lazy" alt="HMRC says it will repay anyone who pays too much" class="sc-1mc30lb-0 ggpMaE inline-gallery-btn"/> open picture in gallery

HMRC says it would repay anybody who pays an excessive amount of (PA) From April, HMRC modified its course of in order that tax codes are routinely up to date for people newly receiving a non-public pension.

Ms Moffat mentioned the Authorities’s resolution that unused pension funds might be topic to inheritance tax from 2027 means “increasingly individuals are contemplating dipping into their pension pots whereas they're alive” to make giant lifetime presents to family members.

Pensions are at present exempt from inheritance tax, so are seen as a tax-efficient manner of passing on wealth.

“An increase in giant lump-sum withdrawals will possible imply a fair larger spike in emergency taxes on these withdrawals,” she mentioned.

“So, the issue of emergency taxes isn’t going away, and there’s an opportunity it might worsen.”

About £1.4 billion has been refunded since 2015, the figures revealed.

A spokesperson for HMRC mentioned: “Finally, no person overpays tax because of making the most of pension flexibility.

“We'll repay anybody who pays an excessive amount of as a result of they’re on an emergency tax code and people can declare a compensation a lot earlier if they need.”