Citywire for Financial Professionals
Stay connected:

View the article online at http://citywire.co.uk/money/article/a1064821

HMRC hands back £37m in overpaid pension tax

Repayment over just three-month period adds to calls for reform of the tax system for flexible pension payments.

 
HMRC hands back £37m in overpaid pension tax
 

HM Revenue & Customs (HMRC) has repaid almost £37 million from over-taxed pension withdrawals over the last three months.

Pension freedom payments are taxed at an individual's marginal rate. If an individual draws a large amount in a single month then they can be taxed at a higher, emergency rate of tax. Individuals who are charged this higher rate can then reclaim this tax from HMRC by filling out a form.

In its latest newsletter HMRC said it has repaid £36.9 million in over-paid tax on flexible pension payments from 1 July to 30 September. Around 8% of those who took a flexible payment from their pension made a reclaim.

This figure was up from the previous quarter with HMRC repaying £26.8 million from 1 April to 30 June 2017.

Many people are calling for changes to the rules around HMRC’s tax system on pension withdrawals which will stop people being over-taxed and these numbers will only add to their calls.

Tom McPhail, head of policy at Hargreaves Lansdown, said the current system was ‘clumsy’ and did not put the best interests of savers first.

‘HMRC and pension providers should be able to request the appropriate tax code in advance of making any payment, the technology is there to do this kind of thing,’ he said.

McPhail said with the system requiring individuals to fill out forms to reclaim tax, many would miss if they were not proactive.

‘In theory HMRC processes mean even if you don’t fill in the form and immediately reclaim overpaid tax, you should eventually get the money back. The problem is HMRC isn’t infallible: if you don’t take the initiative and ask for the money back, you risk missing out; at best you’ll miss out on the use of the money for up to a year,’ he added.

In its submission to the Work and Pensions Select Committee inquiry on pension freedom, which begins today, insurer Royal London also called for a reform to the system to stop individuals being over-taxed.

2 comments so far. Why not have your say?

Ian Gregory

Nov 01, 2017 at 17:35

I get this every year when I get my yearly pension pay 40% fill forms in get it back 4 months later its Rediculess.why they can't learn from one year to the next that I get paid once is beyond me and them.

report this

Tomboy

Nov 01, 2017 at 18:05

They don’t want to know overtax you spend many moths geting it back interest free loan for H M R C

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

The Citywire Guide to Investment Trusts


In this guide to investment trusts, produced in association with Aberdeen Asset Management, we spoke to many of the leading experts in the field to find out more.

Watch Now

Today's articles

Tools from Citywire Money

From the Forums

+ Start a new discussion

Weekly email from The Lolly

Get simple, easy ways to make more from your money. Just enter your email address below

An error occured while subscribing your email. Please try again later.

Thank you for registering for your weekly newsletter from The Lolly.

Keep an eye out for us in your inbox, and please add noreply@emails.citywire.co.uk to your safe senders list so we don't get junked.

Sorry, this link is not
quite ready yet