The pension provider paid out, HMRC took far more than the tax bands say it should, and nobody warned you. This is not a mistake. It is how HMRC instructs providers to tax a first flexible payment, and the money comes back, by claim in a few weeks or by reconciliation after the tax year. Here is why, and which form.
Why the first payment is taxed too much
HMRC’s guidance to pension payrolls says that for a flexible access payment paid as the first and only payment from the pension, they should use the emergency tax code on a week 1 or month 1 basis (HMRC, Paying a company pension or annuity through your payroll, checked 1 November 2026).
A payment made after standard pension benefits have started uses the code already held; the first payment has none. Month 1 is the problem. A cumulative code taxes the year as a whole; a month 1 code taxes each payment as if it stood alone in one month of twelve. The payment gets one twelfth of the £12,570 personal allowance (GOV.UK, Income Tax rates and Personal Allowances: current rates and allowances, checked 13 September 2026) and one twelfth of each tax band, so a one-off lump sum is treated as though it will repeat every month of the year.
What that does to a £39,000 pot
Take the reader who withdrew a £39,000 pot in full and was taxed at 40%. A quarter, £9,750, is tax-free, so £29,250 is taxable. On a month 1 basis, from the 2026/27 figures on GOV.UK (GOV.UK, Income Tax rates and Personal Allowances: current rates and allowances, checked 13 September 2026), the provider gives one twelfth of each band to that single payment.
| Slice of the £29,250 | Rate | Tax |
|---|---|---|
| first £1,047.50 (a twelfth of the allowance) | 0% | £0 |
| next £3,141.67 (a twelfth of the basic band) | 20% | £628.33 |
| next £6,239.17 (a twelfth of the higher band) | 40% | £2,495.67 |
| remaining £18,821.66 | 45% | £8,469.75 |
| Deducted under the emergency code | £11,593.75 | |
| Tax due for the year with no other income | £3,336.00 |
The first bold figure is what the provider deducts; the second is the real bill. Taxed correctly, with no other income in the year, the £29,250 uses the full allowance and £16,680 falls in the 20% band. The overpayment is £8,257.75. With a full State Pension already using the allowance the correct figure is £5,850, so the refund is smaller. The arithmetic is ours from GOV.UK’s bands; the principle is HMRC’s.
Which form gets it back
Since October 2026 GOV.UK starts every pension tax refund with one online tool, which asks what kind of payment you had and sends you to the right claim. If you cannot claim online, it lists four printable forms by situation, and using the wrong one can delay the refund.
The online route is HMRC’s check how to claim a tax refund on your pension, Check how to claim a tax refund on your pension tool (GOV.UK, Check how to claim a tax refund on your pension, checked 1 November 2026). For a claim by post, GOV.UK names the forms like this (GOV.UK, Claim a tax refund on your pension by post, checked 1 November 2026):
| GOV.UK’s description | Form |
|---|---|
| Claim back tax on a flexibly accessed pension overpayment | P55 |
| Claim a tax refund when you’ve flexibly accessed all of your pension | P53Z |
| Claim a tax refund if you’ve stopped work and flexibly accessed all of your pension | P50Z |
| Claim a tax refund when you’ve taken a small pension lump sum | P53 |
So P55 is for a pot you have not emptied, P53Z and P50Z for a pot you have emptied (P50Z if you have also stopped work), and P53 for a small pot lump sum, which is not flexible access. Each printed form has HMRC’s postal address at the end (GOV.UK, Claim a tax refund on your pension by post, checked 1 November 2026).
How long HMRC takes
GOV.UK does not give a fixed number of days for a pension tax refund. Its claim-by-post guidance says HMRC works out any repayment due, pays it by Faster Payments into a bank account in your name or your nominee’s, and checks again after the tax year ends, contacting you if the amount was wrong.
For current reply times, GOV.UK points to HMRC’s online tool for checking when to expect a reply (GOV.UK, Claim a tax refund on your pension by post, checked 16 October 2026; HMRC, checked 16 October 2026).
If you do nothing
The tax comes back anyway, later. GOV.UK says that if you have paid too much or too little tax by the end of the tax year, HMRC sends either a tax calculation letter, a P800, or a Simple Assessment letter, telling you how to get a refund (GOV.UK, If you’ve not paid the right amount of tax, checked 1 November 2026).
The letters go out between June and March of the following tax year. For a withdrawal in April, that can mean waiting more than a year. A P55 or P53Z in the same month brings the same money forward. People registered for Self Assessment get neither letter; the overpayment is settled through the return.
What changed in April 2025
HMRC’s pension schemes newsletter says that from April 2025 it automatically moves people new to a private pension off a temporary tax code and on to a cumulative one, a code that taxes the year as a whole rather than each payment alone, avoiding an overpayment at the year end (HMRC, Pension Schemes Newsletter 166, checked 1 November 2026).
The same newsletter says the rules for taxing first pension payments are not changing and the normal rules of PAYE continue to apply. So regular drawdown income now corrects itself within the year; a one-off first lump sum is still taxed on month 1 and still has to be claimed back.
Before you take the money
The emergency deduction is a timing cost, not a tax. The permanent cost is the one on our tax on pensions hub: a large taxable withdrawal in one tax year is taxed on top of the State Pension and everything else, and part of it can reach 40% for good, not for a month.
The tax-free lump sum page covers the 25% and the difference between one lump sum and slices. GOV.UK says Pension Wise, part of MoneyHelper, offers a free appointment to anyone over 50 with a defined contribution pension (GOV.UK, Plan your retirement income, checked 1 November 2026), and that is the place to ask before the first payment rather than after it.