HMRC repays £24m in overtaxed pension withdrawals

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HM Revenue & Customs repaid over £24m to people who overpaid tax after withdrawing money from their pension savings in the last three months of 2015.

A total of £24.1m was repaid following 10,973 claims from taxpayers between October and December last year who had overpaid tax on pension withdrawals.

This is because the money taken out was taxed using an emergency tax code.

It means the total repaid since the pension freedoms launched in April has now reached £68m.

In the first three months of the freedoms, HMRC repaid £9.7m after 3,405 claims, while the tax service saw repayments soar to £34.2m for the quarter to September 2015, following 12,730 claims.

Figures for the first quarter of 2016 will be published in April.

Intelligent Pensions head of pathways Andrew Pennie warns the figures are likely to be an underestimation, with many unaware of whether they are entitled to claim tax, or how to do so.

He says: “Some people will be unaware of the need to complete the form and it may only be identified when completing their annual tax return. Others will be put off by completing the form and some will complete the wrong one – all of which will result in delays to receiving their repayment of overpaid tax.

“The situation we absolutely must avoid is people taking more money than required from their pension in anticipation of the emergency tax and a concern or belief that they will have to wait too long to receive the overpaid tax amount.”