A pension withdrawal tax refund can be claimed primarily when you have overpaid tax due to your pension provider applying an emergency tax code to a lump sum withdrawal. This often happens with the first flexible payment from a pension pot, as HMRC's system assumes you will take the same amount every month for the rest of the tax year, leading to an upfront overpayment.

• Emergency Tax was Applied: Your pension provider used an emergency or "month one" tax code for a taxable withdrawal because they didn't have an up-to-date tax code for you.
• Total Income Below Personal Allowance: Your total income for the entire tax year (including the taxable part of the pension withdrawal, State Pension, salary, etc.) is less than your personal allowance (typically £12,570 for the 2025/26 tax year).
• Wrong Tax Rate: The tax deducted (often a flat 20% or even 40% on the taxable portion) is higher than your actual marginal rate of tax for the year when all your income is considered.
• One-off Lump Sum: The overpayment is most common with one-off or ad-hoc lump sum withdrawals, rather than regular, ongoing income streams where the tax code usually corrects itself over time