HMRC has unveiled three new forms to allow people to claim back overpaid tax after accessing their pension under the new freedoms.
In a newsletter published today, the Government confirms individuals will be able to use the P50Z, P53Z and P55 forms to reclaim tax if they were placed on emergency tax codes when taking withdrawals from their pension pot.
Previously, if someone without a P45 took a single withdrawal, but left some money in their pot, they would have to wait until the end of the tax year to reclaim. Now, they will be able to use the P55 form to more quickly get a refund from the tax office.
HMRC says people planning to take a series of irregular payments should talk to their pension provider.
It says: “Having applied the temporary rate of tax to the first payment, in some cases the provider might be able to report a zero payment for the months where no withdrawal is made, and work with HMRC to tax subsequent withdrawals and correct the person’s tax position.”
In addition, the P50Z form should be used if individuals flexibly access their entire pension pot and have no other income. People who use up their entire pot but do have other taxable income in the same tax year should use form P53Z.
Talbot & Muir head of technical support Claire Trott says: “I have been talking to many advisers who have been concerned about the possibility of their clients paying too much tax and not being able to reclaim it until the end of the tax year. This has led to considerations such as splitting the payments over a number of months or leaving payments until later in the tax year so the client is out of pocket for a shorter amount of time.
“The introduction of the P55 will mean that although overpayment of tax is still a concern it will be less so because they can advise their client that they will be able to reclaim their tax should they choose to do so.”