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Savers over-taxed £400m since pension freedoms

Tax-Taxation-Blocks-700.jpgSavers have been over-taxed more than £400m since the start of pensions freedoms in April 2015, data from HM Revenue and Customs shows.

This comes in the form of income tax which is deducted when individuals make lump sum withdrawals from their pension fund after the age of 55.

HMRC routinely taxes people using an ‘emergency’ tax code that results in large over payments which then have to be recovered by individual taxpayers.

Taxpayers must fill in one of three different claim forms depending on their circumstances.

The data shows for the whole period since Q2 2015, HMRC has had to pay back tax on 174,000 occasions, with the total amount repaid now standing at £402m.

Over £30m was repaid to nearly 14,000 people in the most recent quarter, Q4 2018.

Figures for the period 1 January 2019 to 31 March 2019 will be published in April 2019.

Royal London pensions specialist Helen Morrissey says: “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.”

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There is one comment at the moment, we would love to hear your opinion too.

  1. The PAYE / the tax system needs to catch up on this.

    How many man hours are being lost refunding overpaid tax?

    Furthermore, recent developments has seen us spending much more time on the tax admin for clients (not that we’re accountants!) whether that be helping savers exceeding the £1,000 allowance deal with that, managing tax on regular withdrawals and/or helping those who are overtaxed get their refunds.

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