Answers · UK 2025/26

Why was my first pension withdrawal taxed so heavily and how do I get the money back?

HMRC usually applies an emergency month-1 tax code to your first flexible pension withdrawal, taxing it as if you got that amount every month, so it over-deducts. You reclaim the overpayment using HMRC forms P55, P53Z or P50Z, or wait for an automatic refund after the tax year ends.

Last updated: 10 June 2026Last reviewed: 10 June 2026How we verify

Full answer

When you take your first flexible pension payment, the provider often has no up-to-date tax code, so HMRC tells them to use an emergency code on a month-1 basis. This treats your one-off withdrawal as if you will receive the same amount every month for a year, pushing it into higher tax bands and over-deducting. Worked example: you take a £20,000 taxable UFPLS (after the 25% tax-free element on a larger withdrawal). On a month-1 emergency code, the provider effectively applies one-twelfth of the Personal Allowance and bands. Income Tax could come out around £6,000-£7,000 rather than the roughly £1,486 due if £20,000 were your only taxable income for the year (£12,570 tax-free, then £7,430 at 20%). To get the overpaid tax back, do not wait silently: if you have emptied the pot, use form P50Z (no other income) or P53Z (other taxable income); if you took only part of it, use form P55. HMRC normally refunds within about 30 days, otherwise it reconciles automatically after 5 April. Spreading withdrawals across tax years and taking a small first payment to set your code can avoid the shock. Use the income tax calculator to estimate the correct tax on a withdrawal. For the reclaim forms see gov.uk at https://www.gov.uk/claim-tax-refund.