Pension lump sums

Why was so much tax taken off my pension lump sum, and how do I get it back?

Take taxable money from a pension pot and HMRC’s standard procedure applies. The first 25% is tax-free. The provider taxes the rest on tax code 1257L on a week 1 / month 1 basis, which looks only at what you are paid in that month, as if the payment were a month’s salary, so a large lump sum is pushed into the 40% and 45% bands whatever your income for the year. The tax is not lost: the difference comes back through one of HMRC’s free forms (P55, P53Z, P50Z or P53) in about a month, or automatically after the tax year ends. This page shows the arithmetic and picks the form.

How the tax is worked out: HMRC’s standard procedure

1. A quarter is usually tax-free

From age 55 (57 from April 2028) you can normally take 25% of a defined contribution pot tax-free, as one lump sum or as a quarter of each withdrawal. The other 75% is taxable income in the year you take it, on top of everything else you receive.

2. The rest is taxed on 1257L M1

Whatever your circumstances, the taxable part of a first flexible payment is taxed on tax code 1257L M1: the standard Personal Allowance on a week 1 / month 1 basis. That looks only at this month’s payment. One month of the allowance and one twelfth of each rate band are set against it, whatever the size of the payment and whatever you earn over the year.

3. So a lump sum is taxed like a huge monthly salary

One month of the basic rate band is about £3,142. Everything above that is taxed at 40% and, above about £10,428, at 45%, even if your income for the whole year is nowhere near those bands.

4. The difference is yours to reclaim

HMRC works out the tax really due on your income for the year. Reclaim the difference in-year with the right form (P55, P53Z, P50Z or P53), usually paid within 30 days, or wait for HMRC’s P800 calculation after 5 April. Since April 2025 HMRC also sends the provider a proper code faster after a first payment, so later payments from the same pot are taxed more normally.

A worked example (2025/26)

David, 62, takes £20,000 from his pot in one go while still earning £15,000 a year. A quarter (£5,000) is tax-free; £15,000 is taxable.

On 1257L M1, month 1 basis, the provider sets £1,048.25 of allowance against it, taxes £3,142 at 20%, £7,287 at 40% and the remaining £3,523 at 45%: £5,128.19 taken off.
The tax really due is different. Adding £15,000 to his £15,000 keeps him inside the basic rate band, so the withdrawal costs £3,000.00 in tax for the year.
He has overpaid £2,128.19. He has not emptied the pot and is not taking more this year, so form P55 gets it back in about a month.

Work out your own refund

Enter the payment, your other income for the year, and what has happened to the pot. We show what 1257L on a month 1 basis takes off, what is really due, the refund, and the form that claims it.

Your figures

Tax yearWhere you live

Amount paid out of the pension, before tax

The gross figure on the payslip or P45 the provider sent you.

Was a quarter of this payment tax-free?

Yes for a lump sum taken straight from the pot (UFPLS) or a first payment that included your tax-free cash. No if you took your tax-free cash earlier and this is drawdown income.

YesNo

Your other taxable income for the tax year

Pay, other pensions and State Pension you expect in the year, before tax. Leave blank if there is none.

Tax the provider actually took off (optional)

From the payslip or P45. Leave blank and we assume 1257L on a month 1 basis.

Was it a small pot or trivial commutation lump sum?

The provider will have called it that on the paperwork. Different rules and a different form apply.

YesNo

Did this payment empty the pot?

YesNo

Will you take more taxable money from this pot before 5 April?

YesNo

Enter the amount paid out to see the tax and the form.

The four forms at a glance

P55

Took part of the pot, did not empty it, and no more withdrawals planned this tax year.

Guide to P55 Claim back tax on a flexibly accessed pension payment, form P55 (GOV.UK)

P53Z

Emptied the pot (or took the whole small pot) and have other income this year.

Guide to P53Z Claim a refund when you have flexibly accessed all of your pension, form P53Z (GOV.UK)

P50Z

Emptied the pot, no other income this year, not claiming taxable benefits.

Guide to P50Z Claim a refund if you have stopped work and emptied your pension, form P50Z (GOV.UK)

P53

Trivial commutation or small pot lump sum taxed at source.

Guide to P53 Claim a refund on a small pension lump sum, form P53 (GOV.UK)

P50

Stopped working part way through the year, not drawing a pension and not claiming taxable benefits: the tax overpaid on your pay comes back now rather than after 5 April.

Guide to P50 Claim back Income Tax when you have stopped working, form P50 (GOV.UK)

If none fit, HMRC refunds automatically through a P800 calculation after 5 April.

Fill in the form, box by box

Pick a form and each screen of it is listed with what goes in every box, or shown as it looks on GOV.UK. Run the calculator above first and the payment, the tax taken off and your other income are filled in for you.

Your figures for the form

Type them in and the boxes below fill in. They are on the payslip or P45 your pension provider sent with the payment.

Total taken out of the pension

The gross payment, before tax, including any tax-free part.

How much of it was tax-free

Usually 25% of the payment. The provider’s paperwork shows it separately; the rest is the taxable part the form asks for.

Tax deducted by the provider

From the same payslip or P45.

Other income you expect this tax year

Pay, other pensions, State Pension and taxable benefits, before tax. Leave blank if none.

Done online

Form P55: claim back tax on a flexibly accessed pension payment

For a taxable payment from a pot you have not emptied, when you will not take any more from it this tax year. Six short screens online, or the same boxes on the printed form. HMRC usually repays within 30 days.

Run the calculator above and the payment, the tax taken off and your other income are filled in here.

Every box can be typed into, here or on the redrawn screens, and what you type stays in the box while you read the rest.

Show the pages as

Screen 1 of 5

About you

Your details as HMRC holds them. The National Insurance number is how the claim is matched to your record; check it against a payslip or your letter from HMRC.

Section
Full name
As HMRC has it. If you have changed your name, update HMRC first or the claim can be held up.
From your records
Section
National Insurance number
Two letters, six numbers, one letter, for example QQ 12 34 56 C. On payslips, your P60 and HMRC letters.
From your records
Section
Date of birth
Used with your National Insurance number to find your record.
From your records
Section
Address and postcode
Where HMRC should write to you. Online, the address on your record is shown and you can update it.
From your records
Section
Telephone number
Optional, but a daytime number lets HMRC resolve a query without writing.
From your records

Screen 2 of 5

The pension payment

From the payslip or P45 your pension provider sent with the payment. The gross figure and the tax taken off are the two that matter; everything else identifies the scheme.

Section
Pension provider’s name
The scheme or company that made the payment, as it appears on the payslip or P45.
From your records
Section
Pension provider’s PAYE reference
A three-digit tax office number, a slash and a reference (for example 123/AB456). It is printed on the payslip or P45 the provider sent.
From your records
Section
Date of the payment
The date the money was paid to you. It decides which tax year the payment falls in.
From your records
Section
Taxable part of the payment, before tax
The gross figure on the payslip or P45. If a quarter was paid tax-free (25%), enter only the taxable part: the provider’s paperwork shows it separately.
From your records
£
Section
Tax taken off the payment
From the same payslip or P45: what the provider deducted on 1257L on a month 1 basis.
From your records
£
Section
You have not taken all of the money from this pension
Put X. The P55 is only for a pot with money still in it; if it was emptied, use the P53Z or P50Z instead.
Put X
Ticked
Section
You do not expect any further payments from this pension in the tax year
Put X. If you will take more before 5 April, the refund is better left until the year end, when HMRC reconciles all the payments together.
Put X
Ticked

Screen 3 of 5

Your other income for the tax year

Everything else you expect to receive between 6 April and 5 April, before tax. HMRC needs it to work out the tax really due for the year; you told the calculator £0. Leave a box empty if you have none of that kind.

Section
Pay from employment expected in the year
Total before tax from all jobs for the whole tax year, including what you have already been paid. Use your latest payslip’s year-to-date figure plus what is still to come.
From your records
£
Section
Tax expected to be deducted from that pay
The tax your employer will take off over the year. Leave empty if you have no job.
From your records
£
Section
Other pensions expected in the year
Private, workplace or annuity income for the whole year, before tax, not counting the payment you are claiming on.
From your records
£
Section
State Pension expected in the year
The weekly amount times the weeks you receive it in the tax year. It is paid without tax taken off, which is why HMRC needs it here.
From your records
£
Section
Taxable state benefits
Jobseeker’s Allowance, contribution-based Employment and Support Allowance, Carer’s Allowance or Incapacity Benefit expected in the year. Universal Credit and Child Benefit are not taxable and are left out.
From your records
£
Section
Savings interest and dividends
Interest outside ISAs and any dividends expected in the year. HMRC uses them to check your savings allowances.
From your records
£
Section
Pension contributions and Gift Aid
Personal pension contributions and Gift Aid donations you will make in the year. They can increase the refund if you pay higher rate tax.
From your records
£

Screen 4 of 5

How to pay the refund

Your own bank or building society account, so the refund arrives by transfer. Never give a claims company’s details: they take a cut of money you can claim free.

Section
Name on the account
Your own name, or a joint account you are named on.
From your records
Section
Sort code
Six digits, from your bank card or banking app.
From your records
Section
Account number
Eight digits. Building society accounts may also need a roll number.
From your records
Section
Pay the refund to someone else (nominee)
Leave empty. Naming a nominee is how claims companies get paid; there is no reason to use it for your own refund.
Put X
Ticked

Screen 5 of 5

Declaration and submit

Read the summary, confirm the figures are correct to the best of your knowledge, and submit. Online you get a confirmation reference at once; keep it.

Section
The information I have given is correct and complete to the best of my knowledge
Put X. Online this is a tick box before the submit button.
Put X
Ticked
Section
Signature and date
On the printed form only. Online, submitting is the signature.
From your records

What happens after you submit

HMRC checks the figures against what your provider reported, works out the tax due on your income for the year and repays the difference to the bank account you gave, usually within 30 days. You get a P800-style calculation showing how it was worked out. If you take another taxable payment before 5 April, tell HMRC: the refund was based on there being no more.

Claim back tax on a flexibly accessed pension payment, form P55 (GOV.UK)

Before you take more

The Money Purchase Annual Allowance

Once you take taxable money flexibly, only £10,000 a year can go into defined contribution pensions with tax relief, instead of the usual annual allowance. Tax-free cash on its own does not trigger it.

Several withdrawals in one year

Each extra taxable withdrawal changes which form applies. If you will take more before 5 April, the provider’s code should sort out the later ones and HMRC reconciles the year afterwards.

Age 55 today, 57 from April 2028

The normal minimum pension age is rising. Anyone with a protected earlier age keeps it; check with your scheme before planning around a date.

How you can take your pension (GOV.UK)Pension annual allowance (GOV.UK)Pension lump sum allowance (GOV.UK)

Every other refund routeStopped work, overpaid on a P800, work expenses, savings interest: which free form gets it back.Find your refund route How your private pension is taxed under PAYEWhy a second pension is on BR, how HMRC splits your allowance, and what to ask for.Read the explanation State Pension and your tax codeWhy the State Pension is paid without tax taken off, and how the tax on it is collected.Read the explanation