Pension update as HMRC pays out £22million in last three months – are you due a refund? | Personal Finance | Finance
Pension tax issues have arisen since the introducing of pension freedoms in 2015. It means individuals can withdraw from their pension either through small amounts, or as a lump sum.
However, if someone accesses their pension for the first time, they could trigger an emergency tax code – meaning more tax on their pension.
A large withdrawal in the first month is taken by the tax system to dictate a large withdrawal across each remaining month of the tax year.
Consequently, some individuals will find they are taxed much higher than they actually need to be.
Latest HMRC data shows that from January 2022 to March 2022, the Revenue has repaid a total value of £22,317,529 in tax on pension withdrawals.
READ MORE: WASPI widow, 66, faces ‘dire’ circumstances as energy bills soar
There could, however, be solutions to this pension issue.
This could help Britons avoid mammoth tax and the cycle of subsequent refunds.
Mr Tully continued: “For customers making a pension withdrawal for the first time, a workaround is to initiate a small withdrawal of say £100.
“That will generate a tax code from HMRC which the pension provider will apply to any subsequent withdrawals.
“That will result in the tax being taken at source being far more accurate in many more cases, reducing the paperwork but equally importantly the customer receiving a more accurate withdrawal.”
To claim this refund, individuals can make use of the online service, which is perhaps the quickest way to secure the refund.
Individuals should, however, be aware they will need a Government Gateway user ID and password for this option.
If a person does not have one, then they can create it when using the service for the first time.
Alternatively, they could fill in an on-screen form, print this, and then send it by post to HMRC.
The final option is for individuals to print off the form from the Government website and fill it in by hand.
An HMRC spokesperson previously told Express.co.uk: “Nobody will overpay tax as a result of taking advantage of pension flexibility.
“Individuals can claim back any overpayment due to an emergency tax code being applied immediately and we will repay this in 30 days. Anyone who does not claim will be automatically repaid at the end of the year.”
