£36m Paid In Overcharged Pension Tax

01/11/2017

HM Revenue and Customs has repaid just over £36m to people who withdrew part of their pension but were overcharged on their tax bills in the last quarter, reports Money Marketing.

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Nearly ten per cent of those taking a flexible payment from their pension between July and September made a reclaim, with the average amount coming in at £2,300.

Former pensions minister Steve Webb have recently been campaigning for reform of HMRC’s pension tax administration. Currently, defined contribution pension withdrawals are not taxed on a cumulative basis each month like pay-as-you-earn taxes are, so savers will be taxed as if they made the same withdrawal each month of a year, even if they chose to reduce withdrawals or space them out, unless their provider has a tax code to use for them.

Hargreaves Lansdown head of policy Tom McPhail says: “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.

“This is a clumsy system which is certainly not designed with the best interests of the investor at its heart. 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.”

If you would like more information on how to claim back overpaid pension tax please contact us >>

Written by Jeremy Jukes | Associate Director

Ex semi-professional footballer Jeremy joined Mantle Financial Planning in 2008 after many successful years with Aegon. Read more >>

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