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Savers over-taxed £280m on pensions since freedoms

Savers have been over-taxed more than £280m since the start of the pension freedoms, new figures from HM Revenue & Customs show.

According to a newsletter published this week from HMRC, in the first quarter of the year more than £22m had to be repaid to those making flexible withdrawals from their pensions.

Since the reforms in April 2015, taxes over-collected from the government totalled nearly £285m.

Over 10,000 people had to claim back overpaid tax in the last quarter, data shows.

Figures for the period also show £1.7bn of flexible pensions payments were reported to HMRC from a total of 222,000 individuals.

Royal London director of policy Steve Webb calls for a reform in the way pensions are taxed, calling the current system “absurd”.

He says:”These quarterly figures are a regular reminder of the absurd way in which pension withdrawals are taxed.  HMRC is perfectly happy to over-tax tens of thousands of people each year and make them jump through hoops, having to choose between three different forms to complete and then wait to get their money back.

“This is a system run for the convenience of HMRC, not the taxpayer. It is time to move to a simple system where basic rate tax is withdrawn at source and any adjustment is made through end year tax returns”.

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  1. As I have said previously and often, HMRC is “not fit for purpose”.

    There are more word in the HMRC rule book than there are in the Bible!

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