HMRC pay back £31 million in pension tax

Her Majesty’s Revenue & Customs (HMRC) have repaid more than £32 million in emergency pension tax less than a year after they repaid £31.1 million to another 12,500 people.

The second payout of a record £32.2 million was made to 10,000 savers between October and December of last year while the earlier one was in April.

Emergency tax

Many of the repayments were for emergency tax paid when people withdrew money from their pension.

Pensions expert Jon Greer said issues with the country’s PAYE system was responsible for the refunds.

Forced

He said: “Pension savers have been forced to claim back over £3,000 per person, and it has nothing to do with anything pensioners have done wrong.

“It lies solely with the PAYE system. HMRC’s PAYE system is not built for one-off withdrawals from a pension and so does not fit with the new world of pension freedoms.”

Tax code

When savers extract more than the 25%eir pension pot the saver is then charged according to their tax code.

But if their pension provider does not have the correct tax code then HMRC has to use an emergency code which is often higher than the correct one.

Mr Greer commented: “People who make such withdrawals from their pensions, as is their right, may overpay tax and then wait 12 months or more to get the money back when HMRC automatically reviews tax liability.

Created

“If you have been charged then you can fill in one of three forms: P55, P53Z and P50Z. These were created so people could claim back mid tax-year and not have to wait to receive money that is rightfully theirs.

“The onus is very much on the government to ensure it is doing all it can to give pensioners their hard-earned money back. An over £3,000 hit on your pension can be substantially detrimental to your lifestyle in retirement.”

The £31.1 million refund earlier in the year was created in exactly the same way, but was to 14,000 people.

Highly dubious tactic

Senior analyst Tony Selby said HMRCs ‘highly dubious tactic’ has never been formally consulted or reviewed.

He added: “Regardless of whether you think this is the right approach or not, this failure to properly consider a policy which impacts hundreds of thousands of savers is nothing short of a disgrace.”