{
  "id": 14868042,
  "title": "‘Absurd’: Pension savers refunded £188m after HMRC overtaxes withdrawals",
  "url": "https://urgent.news/2026/10/16/absurd-pension-savers-refunded-188m-after-hmrc-overtaxes-withdrawals",
  "topic": "business",
  "section": "Business",
  "published": "2026-10-16T04:00:00.000Z",
  "source": {
    "name": "City AM",
    "slug": "city-am",
    "url": "https://www.cityam.com/absurd-pension-savers-refunded-188m-after-hmrc-overtaxes-withdrawals/"
  },
  "original_language": "en",
  "account": "In the 2025/26 financial year, the HM Revenue and Customs (HMRC) refunded over £188 million to tens of thousands of taxpayers who had too much tax deducted from their pension withdrawals. HMRC processed 54,166 pension withdrawal repayment claims, totaling around £188 million, according to figures obtained via a Freedom of Information request. On average, impacted savers were reimbursed roughly £3,470. The overtaxation occurred due to default Pay As You Earn (PAYE) rules used by HMRC to collect income tax and national insurance payments from pension withdrawals. The system often deducts taxes from private or workplace pension withdrawals, even if the withdrawal is not considered monthly income. This can happen when pension providers do not have up-to-date tax codes for customers, leading HMRC to tax the withdrawal as regular income. Steve Webb, a partner at pensions consultant LCP and former pensions minister, criticized the process, calling it \"absurd\" and an unnecessary burden for both the department and taxpayers. He argued that the system is run primarily for HMRC's convenience rather than the taxpayer's and should be reformed. The vast majority of refunded money was through P55 forms, covering partial withdrawals, with £124.5 million returned across 37,116 claims. P53Z forms, used by those who have completely exhausted their retirement pot, saw £51.8 million paid out from 14,372 claims. An additional £10.8 million was refunded from 2,519 P50Z forms, which covers individuals without other existing income. Only around half of the claims resulted in a payout. HMRC stated that it reviews every case individually, considering factors like personal circumstances, employment status, and tax rates before issuing a repayment. Despite HMRC's efforts to prevent overcharging, many individuals need to be made aware of the issue, as the department does not automatically notify savers of overtaxed withdrawals. This often leads to a delay in receiving refunds, with some waiting months for the end of financial year tax reconciliation process.",
  "summary": "Tens of thousands of taxpayers were handed money back from HMRC last year after savers had too much tax deducted from their pension withdrawals, City AM can reveal. HMRC processed 54,166 pension withdrawal repayments in the 2025/26 financial year, worth around £188m, according to figures obtained through a Freedom of Information request. During the financial [...]",
  "key_points": [],
  "editors_take": null,
  "illustration": null,
  "coverage": {
    "outlets": 1,
    "also_reported_by": []
  },
  "ai_generated": true,
  "disclaimer": "Summaries, key points and the editor’s take are written by software from other outlets’ reporting and may contain errors — always check the linked original."
}