HM Revenue & Customs (HMRC) has refunded a substantial sum exceeding £46 million to pensioners who were incorrectly overtaxed on their pension withdrawals during the final quarter of 2025. This significant repayment highlights ongoing issues within the tax system affecting retirees accessing their savings.
Quarterly Repayment Figures Revealed
Official HMRC data indicates that a total of £46.26 million was repaid for pension withdrawals made between October and December 2025. During this period, the tax authority processed 13,652 repayment claims, which represents a slight decrease from the 14,612 claims handled in the same quarter of the previous year.
Average Refund Amounts Remain Consistent
The typical refund amount stood at £3,388, showing minimal change from the £3,389 average recorded during the final quarter of 2024. This consistency in refund values suggests that the scale of overtaxation has not diminished significantly year-on-year.
Expert Criticism of System Flaws
Jon Greer, head of retirement policy at financial services firm Quilter, commented on the figures, stating: "While the number of claims has fallen slightly, the average amount refunded has barely shifted." He further elaborated on systemic problems, adding: "Every quarter we see thousands of pensioners penalised for accessing their own savings. PAYE was designed for regular earnings, not ad hoc pension withdrawals, and retirees continue to face unnecessary administrative hurdles."
Broader Context of HMRC Digital Transformation
This pension tax issue emerges alongside revelations about the substantial costs associated with HMRC's Making Tax Digital programme. Since its launch in 2015, this mandatory government initiative has cost taxpayers nearly £850 million.
Digital Transformation Costs and Projections
The programme, which aims to transform tax administration into a real-time digital system, requires businesses, self-employed individuals, and landlords to use approved software for maintaining digital records and submitting quarterly updates. Current annual costs exceed £120 million, with total expenditure reaching £849.91 million according to reports. The National Audit Office has warned that overall costs are forecast to rise beyond £1.3 billion, raising questions about value for money amidst ongoing pension taxation problems.
