New figures issued by HM Revenue and Customs shows the amount of overpaid income tax reclaimed by pension savers reached a record level in Q3 2019, reports Money Marketing.
In the three months to September 2019, HMRC had to hand back over £54m in tax on pension withdrawals, the highest quarterly figure since pension freedoms were introduced in 2015.
Over the whole period, the total amount taken in emergency tax on pension withdrawals and subsequently repaid stands at £535m.
Under current tax rules, when an individual withdraws money from their pension, HMRC makes assumptions about how many more times they will make withdrawals over the rest of the financial year.
In 2018, the government’s own Office for Tax Simplification called on HMRC to review this process of applying emergency tax codes to pension withdrawals, but HMRC refused to act.
Royal London director of policy Steve Webb says: “Even by their own low standards, HMRC have outdone themselves in the last three months, taking more than £54m of savers’ money in income tax to which they were not entitled.
“It cannot be right that tens of thousands of people each year have too much tax taken out of their pension and then have the hassle of filling in a form to get back money that is rightfully theirs. Whoever ends up running the country after the general election needs to tell HMRC to stop this practice as a matter of urgency.”