HMRC repaid £46.3m to people who overpaid tax when they flexibly accessed their pensions in the fourth quarter of 2025, the latest government Pension Schemes Newsletter has shown.

According to the update, HMRC repaid a total of £46,258,175.80 from 1 October to 31 December 2025, down from £48.6m the previous quarter.

There were 13,652 people who received refunds of overpaid tax in Q4, with an average tax repayment per saver of around £3,388.

While the number of people receiving repayments fell from 14,612 the previous quarter, the average refund value was around the same.

The tax repayments on flexible withdrawals were necessary as HMRC applied an emergency 'month 1' tax code on the first withdrawal, which can lead to an initial over-taxation.

People reclaiming overpaid tax must fill in one of three forms, with the latest update revealing that HMRC processed more than 13,500 forms during the period, including 8,488 P55 forms, 4,548 P53Z forms, and 616 P50Z forms.

More than £1.5bn has now been reclaimed by people overtaxed on pension withdrawals since 2015, with the milestone being passed in Q3 2025.

Commenting on the latest update, Quilter head of retirement policy, Jon Greer, said: “Every quarter we see thousands of pensioners penalised for accessing their own savings, as the system undermines the very flexibility it intended to deliver.

“HMRC has taken steps to accelerate repayments, but the figures make clear that the core issue remains unresolved.

“PAYE was designed for regular earnings, not ad hoc pension withdrawals, and retirees continue to face unnecessary administrative hurdles as a result of the unintended friction that is baked into the process.

“One of the pressures driving higher tax liabilities for retirees is the growing share of the personal allowance taken up by the state pension.”

Greer noted that, with the allowance now frozen until April 2031 and the state pension continuing to increase, more people were being pushed into paying tax, and while there had been some suggestions that state pension income will not be taxed, it remained to be seen how, if, or when this would be enacted.

“For now, as people take flexible withdrawals to top up their income, a greater proportion becomes taxable, adding to the frustration when over-deductions occur,” he continued.

“HMRC’s efforts to reduce the administrative burden on savers and minimise the number of overpayments made have had little impact so far, and it is clear further steps need to be taken to properly address the issue.

“In the meantime, for those considering accessing their pension, seeking guidance or professional financial advice will be key to ensuring you make any pension withdrawals in the most tax efficient way possible.”

---