Got a pension? HMRC may owe you £3000+ in overpaid tax

According to figures from HMRC, the taxman has been charging some 7,000 pension savers too much tax. Over a recent three-month period, these people coughed up approximately £33 million in overpaid tax. That works out as an average of £3,363 per person.

Why have pensioners overpaid tax?

The problem arises when people over the age of 55 access one-off lump sums from their pensions. In theory, you can withdraw the first 25% of your pension tax free. However, in practice, many people who do this get taxed at an emergency rate.

This is the reason why so many people have ended up paying tax unnecessarily.

How do I reclaim my overpaid tax?

If you have taken money out of your pension and have been taxed, you’ll be keen to get your money back. So how do you go about it?

Depending on how fast you want your money, you have a number of options.

First of all, you can do nothing. If you do this, HMRC should repay the overpaid tax at the end of the current tax year.

Alternatively, you can claim your money back by filling out the relevant form.

Which form do I need to fill in for a refund?

The form you need to fill in to get a refund depends on how you accessed your pension. There are three options.

• Form P50Z. Use this form if you have taken a pension flexibility payment that used up all of your pension pot and you have stopped working.
• Form P53Z. If you have taken all of your pension pot and are still working, use this form.
• Form P55. Use this if you have only taken part of your pension pot.

You can access these forms here and here.

Where can I find out more about pensions?

If you’d like to learn more about pensions, be sure to check out our article: Pensions and tax – a great way to save. Alternatively, if you are THP client and you’d like advice on pensions and their tax implications, drop your account manager a line today.