HMRC challenged over ‘shameless’ pensions overtaxing
HMRC repaid over £30m to pension savers who had been taxed incorrectly on lump sum withdrawals in the last quarter of 2018, while the total paid back since the start of pension freedoms in April 2015 now tops £400m, prompting calls for a change in approach
31 Jan 2019
Latest quarterly statistics on flexible payments from pensions for the period 1 October 2018 to 31 December 2018 from HMRC show it processed repayments totalling £30.24m to almost 14,000 individuals who had income tax deducted when they made lump sum withdrawals from their pension fund after the age of 55.
In most cases, taxpayers have been put on an emergency tax code as a result of making the withdrawal and have to claim back any overpayment.
These included 7,770 P55 forms for reclaiming an overpayment of tax when someone has flexibly accessed part of their pension pot, 4,537 P53Z forms for overpayment of tax on small pension lump sums, and 1,685 P50Z forms submitted by those who have stopped working and flexibly accessed their pension.
Insurer Royal London says looking at data for the whole period since Q2 2015, HMRC have had to pay back tax on 174,000 occasions, with the total amount repaid now standing at £402m.
Helen Morrissey, pensions specialist at Royal London said: ‘HMRC is utterly shameless in the way that it over-taxes people and then expects them to claim a refund. The system should be run for the convenience of taxpayers, not the convenience of HMRC. It is time that this over-taxing spree was brought to an end’.
Report by Pat Sweet