Emergency tax on pension withdrawals — and how to claim it back

The tax deducted from a first flexible pension payment can differ from the final liability. In the original 1257L Month-1 example, a £30,000 taxable pension payment has £11,878.20 deducted. With no other income and England/Wales/Northern Ireland rates, the annual liability is £3,486, leaving £8,392.20 over-deducted. This is a worked code and income scenario, not the treatment of every first withdrawal.

Which code applies to the first payment

PAYE applies to the taxable pension element: normally 75% of a UFPLS, or all of a drawdown income payment. The £30,000 worked below is that taxable element, not the gross UFPLS. Under PAYE94055, a P45 dated in the current tax year supplies the code, operated on Month 1. An existing code can cover an additional payment only when it is made at the same time as the existing payment. Otherwise the first payment uses the emergency code; a previous-tax-year P45 does not qualify for the current-year exception.

HMRC PAYE94055 ; PTM063300 ; ITEPA 2003 s.579A and s.683.

The month-1 mechanic, step by step

Month-1 uses the first line of HMRC’s tables, but their rounding order matters. For 2026/27, Table A derives £1,048.26 of free pay from code 1257L. The remaining taxable pay is rounded down to whole pounds. The unrounded amount selects the Tables B to D formula against Cvalues rounded up to pounds; that formula retains the exact fractional Month-1 taxable-pay threshold and threshold tax until the final result is rounded down to a penny.

The member’s true position is nothing like that. With no other income, £30,000 less the full £12,570 personal allowance leaves £17,430, all within the basic rate band: £3,486 of tax. The month-1 code has taken £8,392.20 too much — an effective 39.6% deduction on a payment whose real liability runs at 11.6%. The common trap is to construct three rounded mini-bands from annual income-tax thresholds. PAYE does something more specific: code-derived Table A free pay first, then whole-pound taxable pay and exact fractional taxable-pay thresholds in the selected Tables B to D formula. The pension emergency tax calculator computes the month-1 deduction, true liability and reclaimable difference.

HMRC Table A ; Tables B to D (April 2026) ; PAYE tax-table routine v24.0 ; PAYE94055.

Claiming it back: P55, P53Z or P50Z

The current form pages contain more than a two-way pot test. P55 requires all three of these facts: the pot was not emptied, no further regular or flexible payment is expected before the tax-year end, and the pension body cannot make the refund. After the whole pot is emptied, compare P53Z and P50Z against their current pages. P50Z contains work, unemployment-duration, retirement, former-employer-pension, study, income, timing and named-benefit alternatives or exclusions; P53Z asks for the pension P45 and expected income. A compact calculator cannot infer that declaration reliably, so the tool shows both rather than presenting a false deterministic answer.

Doing nothing also works. PAYE is reconciled after the year end, and HMRC repays any overpaid tax through the normal end-of-year process without a claim — the forms exist to accelerate the repayment into the tax year, not to create the entitlement. The over-deduction is the member’s money either way; the only question a form answers is when it comes back.

gov.uk P55 / P53Z / P50Z guidance ; HMRC PAYE94055.

Further payments from the same scheme

Later payments use the code and basis HMRC issues. A cumulative code can reconcile earlier deductions through later payroll; a week-1/month-1 code does not perform that cumulative reconciliation. A refund is therefore not guaranteed in the next payment. Where a further regular or flexible payment is planned before 5 April, the current P55 conditions are not met. A later cumulative computation may also unwind some of the earlier deduction. What the withdrawal itself costs in tax — as opposed to what PAYE borrows up front — is worked in the pension withdrawal tax calculator, and the wider context in pension withdrawals: how taking money out is taxed.

HMRC PAYE94055 ; gov.uk forms P55 / P53Z / P50Z.