Pension drawdown taxed at source - how long does HMRC take to refund overpaid tax? (self employed)

AspiringPensioner

I'm 58, self-employed (sole trader) and as I'm winding down to retirement my earnings will be very low this tax year (2025-26) ie under £2k. So I decided to cash in one of my personal pension pots to make the most of my personal allowance (I detailed all this in recent posts asking other questions).

The pension pot in question is a legacy one with Phoenix Life that has a value of just over £10k. I just received the pension pack through and I didn't realise until now that the pension company taxes the payment at source. Their figures indicate that they will actually deduct about 26% in tax from the 75% non-TFLS element of the pot. When I called to clarify, the person on the phone couldn't really explain why they're not deducting 20% tax, and was talking about emergency tax codes (?). But anyway, it seems that's just how it works, and I will have to reclaim this portion from HMRC.

My question is, how long does it generally take these days to claim a refund of overpaid tax from HMRC, as a self-employed person using self assessment?

I searched online for an answer to this, and also asked the question of the HMRC's online chatbot, which said it would generally take 4 weeks after claiming a refund. This page on the HMRC website led to form P53Z and also said "HMRC will normally refund you within 30 days of receiving your claim." but I don't think that was specific to self-employed people.

I'm intending (and ready) to do my tax return as soon as possible after 6th April and have already done a spreadsheet with all my calculations, so am I correct in thinking that when I do my self assessment online (if I do go ahead and cash in this pension) and plug in the amounts into this section of the return (extract shown below), the end result will be that the calculation page shows the refund due (and signposts how to claim it)?

Thanks for any up to date guidance on the length of time HMRC refunds are actually taking. Is 4 weeks realistic or is it in reality much longer than that?

Dazed_and_C0nfused

You have no reason whatsoever to complete a repayment claim form like a P53Z.

It will all be resolved via your Self Assessment return. Which you can normally file online on 6 April, as soon as the tax year has ended.

Timescales are a bit of an unknown quantity but potentially you could get a refund within a few days of submitting the return.

And basic rate tax wouldn't apply unless you were using the "small pots" rules. Which you have to specify to the pension company but wouldn't be relevant here as your pension was greater than £10k.

The tax deducted won't be 26% either, it will be a mix of 0%, 20% and 40%. Which might add up to 26% of the taxable element.

Greatgimp

Retired, with my drawdown pension the overtaxed bit took several months (maybe 5-6) to come back to me.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81906638#Comment_81906638

5-6 months after you filed your Self Assessment return?

dunstonh

When I called to clarify, the person on the phone couldn't really explain why they're not deducting 20% tax, and was talking about emergency tax codes (?). But anyway, it seems that's just how it works, and I will have to reclaim this portion from HMRC.

The 75% part of the pension goes through payroll. The first payment on a payroll uses what used to be known as the emergency tax code and many still use that term. Its known as month one PAYE code.

PAYE doesn't work on a flat 20%.

My question is, how long does it generally take these days to claim a refund of overpaid tax from HMRC, as a self-employed person using self assessment?

When you say self assessment, what do you mean?

If you mean within your tax return, you will complete that in the new tax year and get it sometime after that.

I searched online for an answer to this, and also asked the question of the HMRC's online chatbot, which said it would generally take 4 weeks after claiming a refund. This page on the HMRC website led to form P53Z and also said "HMRC will normally refund you within 30 days of receiving your claim." but I don't think that was specific to self-employed people.

The paper version can take upto 6 months to refund (as seen last year with people doing them in April to June not getting them until closer to Christmas. Typically, it is closer to 3 months, but some have been getting theirs much quicker recently. The online version using Government Gateway is usually the quickest and you would expect to count in weeks rather than months.

Neither of these are using the self assessment method.

I'm intending (and ready) to do my tax return as soon as possible after 6th April and have already done a spreadsheet with all my calculations, so am I correct in thinking that when I do my self assessment online (if I do go ahead and cash in this pension) and plug in the amounts into this section of the return (extract shown below), the end result will be that the calculation page shows the refund due (and signposts how to claim it)?

You cannot use the P53Z in the next tax year. That is only for claims in the same tax year.

AspiringPensioner

Thanks all for the feedback, although there's certainly not a clear consensus coming through on how long this process generally takes, so I'm a wee bit confused tbh.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81906899#Comment_81906899

It mainly depends on when you choose to submit your return.

There can be delays once that is submitted but until you do it there is no chance of any refund.

So if you file your return on, or very shortly after, 6 April and provide any additional info HMRC need (you sometime have to wait 2-3 days for the return to be processed at HMRC's end and then claim the refund from your Self Assessment account) you could expect the refund in April.

AspiringPensioner

https://forums.moneysavingexpert.com/discussion/comment/81906705#Comment_81906705

Umm, bit confused here, I'm not on a payroll as I'm not an employee, as I said I'm self employed and not in any PAYE system…

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81906905#Comment_81906905

It's your (taxable) pension income that is relevant for PAYE purposes.

QrizB

Umm, bit confused here, I'm not on a payroll as I'm not an employee, as I said I'm self employed and not in any PAYE system…

The taxable part of your ~£10k pension (so about £7.5k) will be processed by your pension company through their PAYE system. You'll be on their "payroll".

AspiringPensioner

https://forums.moneysavingexpert.com/discussion/comment/81906902#Comment_81906902

Thanks, yes my intention is to submit my tax return on 6th or 7th April - mine is always pretty simple and as I said, I have all the figures ready. It's good to know that it should be straightforward to initiate claiming the refund through SA, and that it doesn't generally take months to get the money through.