Give us your details and we’ll be in touch asap

Insights

All Articles

Business Services

Business Tax

Personal tax

Probate and Inheritance Tax

VAT

pensions  •  Personal tax  •  Personal Taxation

Have you overpaid tax on your pension pot?

By RJP LLP on 24 February 2022

Have you got a personal pension? Interested in making ad hoc withdrawals? Or have you been making withdrawals already?

Under the pension freedom rules introduced in 2015, taxpayers aged 55 or over can freely access their pension savings. Any withdrawals beyond the 25% tax free amount are taxable at the individual’s marginal rate of income tax.

So, if you are over 55, it is possible to gain flexible access to your pension pot, however there may be some additional tax to pay. And if you have withdrawn funds you may be entitled to a tax rebate – along with over 13,000 other people in the 2020/21 tax year.

During the last tax year, HMRC processed 13,579 so called pension flexibility claim forms and paid back £42.2m to people who had been charged too much tax when they withdrew money from their pensions.

This situation arises when your pension provider does not have details of your current tax code and HMRC applies an emergency rate against your withdrawal. This means you may be charged a higher rate of tax than expected, although the money is typically refunded at the end of the tax year. If you face this situation you can reclaim the money earlier, mid tax year, using one of three HMRC forms – P55, P53Z or P50Z.

Many experts are proposing that HMRC changes this system, initially deducting basic rate tax from pension withdrawals instead, and then adjusting the amounts paid if there was a shortfall. As yet, HMRC has not committed to any system revisions so in the meantime, our advice is to ensure your pension provider is aware of your current tax code if you intend to make withdrawals.

If you need any advice on how to better manage your tax liabilities, please get in touch via partners@rjp.co.uk.

Read more articles like this

Private pension withdrawal age raised to 57

Tax and investment planning: 5 important pensions regulation changes and what to do pre tax yearend

Budget brings restriction to pension tax relief for highest earners

Non-doms, close companies and landlords bear brunt of George’s Budget 2015 tax reforms

Budget may see restriction to tax relief on pension contributions

Share this:

All Articles

Business Services

Business Tax

Personal tax

Probate and Inheritance Tax

VAT

Image

60 Day Deadline for CGT Returns and Tax Payments

If you sell a property and incur capital gains tax on the transaction, you will need to file a tax return and also pay any tax that is due within 60 days of completion, or penalties will arise. Need help with your property taxes? Talk to us.

Have you got a personal pension? Interested in making ad hoc withdrawals? Or have you been making withdrawals already?

Under the pension freedom rules introduced in 2015, taxpayers aged 55 or over can freely access their pension savings. Any withdrawals beyond the 25% tax free amount are taxable at the individual’s marginal rate of income tax.

So, if you are over 55, it is possible to gain flexible access to your pension pot, however there may be some additional tax to pay. And if you have withdrawn funds you may be entitled to a tax rebate – along with over 13,000 other people in the 2020/21 tax year.

During the last tax year, HMRC processed 13,579 so called pension flexibility claim forms and paid back £42.2m to people who had been charged too much tax when they withdrew money from their pensions.

This situation arises when your pension provider does not have details of your current tax code and HMRC applies an emergency rate against your withdrawal. This means you may be charged a higher rate of tax than expected, although the money is typically refunded at the end of the tax year. If you face this situation you can reclaim the money earlier, mid tax year, using one of three HMRC forms – P55, P53Z or P50Z.

Many experts are proposing that HMRC changes this system, initially deducting basic rate tax from pension withdrawals instead, and then adjusting the amounts paid if there was a shortfall. As yet, HMRC has not committed to any system revisions so in the meantime, our advice is to ensure your pension provider is aware of your current tax code if you intend to make withdrawals.

If you need any advice on how to better manage your tax liabilities, please get in touch via partners@rjp.co.uk.