You could have overpaid tax on withdrawing money from your pension.
Read today’s article to find out how thousands of pension savers had a tax refund and how you could do it too.
(2-minute read)
We will cover:
- How pension savers overpaid tax from withdrawing their pension money
- Different forms to claim a refund explained
HMRC’s Overpaid Tax Pension refund
After overcharging tax for pension withdrawals, HMRC has repaid millions of pounds to pension savers.
In the last three months, almost 10,000 people filled in forms for a refund and got back a total £33m.
Since 2015, which is when Pension Freedoms was introduced, a total of £925m has been refunded.
So how does overpayment occur?
The overpayment in tax for withdrawing money from pensions is the result of how tax is calculated.
Savers with defined pension contributions (into so-called “pot of money” pensions) are taxed according to a regular yearly income.
HMRC taxes what someone takes out of their “pot” for the first time as if it were one twelfth of an annual income.
This is taxed at an “emergency” tax rate.
HMRC does this in case the saver makes multiple withdrawals over the year, which would push them into a higher tax bracket.
HMRC stated that those who overpaid due to an emergency tax code “will automatically be repaid at the end of the year. Individuals have the option of claiming back any overpayment earlier if they wish.”
Individuals can claim back using of three forms within 30 days of overpayment:
P55 – if they’ve withdrawn only part of their pot
P53Z – if they’ve emptied their pot but have other taxable income that tax year
P50Z – if they’ve emptied their pot but have no other taxable income that tax year
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