How to Claim Tax Back on Your Pension

Individuals often overpay income tax on their first flexible pension withdrawal, but this money can be reclaimed from HM Revenue & Customs (HMRC). Understanding why this overpayment happens is the first step to getting your money back. This guide explains the causes of pension tax overpayment and the procedures for making a claim.

Common Reasons for Pension Tax Overpayment

The primary reason for overpaying tax on a pension withdrawal is the application of an emergency tax code. When you first take a taxable payment, your provider may not have an up-to-date tax code and must apply a temporary one on a ‘Month 1’ basis. This means the tax for your single withdrawal is calculated as if you will receive the same amount every month for the tax year.

For example, a £10,000 lump sum is treated as a monthly income, projecting an annual income of £120,000 and pushing the withdrawal into higher tax brackets. While this system eventually corrects itself for regular monthly payments, it results in an immediate overpayment for a single lump sum that needs to be actively reclaimed.

While the initial withdrawal will still be subject to an emergency tax code, HMRC is changing how it handles these situations. From April 2025, HMRC will automatically update an individual’s tax code after their first taxable pension payment. This change is intended to ensure any subsequent withdrawals within the same tax year are taxed correctly.

Information and Forms Needed for Your Claim

Before you initiate a claim, you must gather specific details. You will need your National Insurance number and the PAYE reference number from your pension provider. You must also have the exact details of the pension payment, including the gross amount and the tax deducted. Finally, provide details of your other expected income for the tax year, which runs from April 6th to April 5th; estimates are acceptable if final figures are unavailable.

With this information, select the correct HMRC form for your circumstances:

• Form P55: Used if you have taken a partial withdrawal and have not emptied your pension pot.
• Form P53Z: Used if you have cashed in your entire pension pot and have other sources of taxable income.
• Form P50Z: Used for individuals who have emptied their pension pot and have no other taxable income during the tax year.

These forms are available on the GOV.UK website.

The Process for Submitting Your Claim

You can submit your completed claim form to HMRC online or by post. The online method, via the GOV.UK portal, requires a Government Gateway user ID and is the quickest route. For a postal submission, download and print the form from the GOV.UK website and mail it to: Pay As You Earn, HM Revenue and Customs, BX9 1AS.

After your claim is submitted, HMRC will review it and calculate your refund. Online claims are processed faster, often within 10 working days, while postal claims can take longer. The refund will be paid into your bank account if you provided those details; otherwise, a cheque will be sent. You can monitor your claim’s progress through your Personal Tax Account on the HMRC website.

Claiming Through a Self-Assessment Tax Return

Reclaiming overpaid pension tax can also be done through a Self-Assessment tax return. This method is required if the tax year of the withdrawal has already ended. It is also the standard procedure for anyone who must file a tax return for other reasons, such as being self-employed.

When completing your tax return, you must report the gross value of the pension payment and the income tax deducted by your provider. This information is entered in the “UK pensions, annuities and other state benefits” section of the tax return.

The Self-Assessment system will then calculate your total income tax liability for the year, accounting for all income and tax paid. Any overpayment from the emergency tax on your pension will be factored into this final calculation. The resulting refund will either be paid to you or used to reduce other tax you owe.