HMRC repays £50m to thousands of pension savers – how to see if you’ve overpaid tax | Money News

HMRC has returned overpaid tax to more than 12,500 pension savers, latest figures show. 

The tax office repaid more than £50.3m in the second quarter of the year to people who were overtaxed for making flexible pension withdrawals, with the average payout amounting to around £4,000.

Britons are overtaxed on flexible pension withdrawals because HMRC applies an emergency tax code. The system assumes a single withdrawal will be repeated every month of the year, artificially inflating your expected annual income and triggering higher-rate tax brackets.

For example, a £10,000 withdrawal could mean you are taxed as if your annual income is £120,000.

Adam Cole, retirement specialist at Quilter, said: “Retirees are being left out of pocket while they wait for HMRC to return their own money, a process that could and should be quicker or avoided altogether.”

Think you have overpaid tax?

If you have made a single pension withdrawal, it’s worth checking if you have overpaid tax here.

If you have, you’ll need to fill out one of three claims forms: a P55, P53Z or P50Z.

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You should use a P55 if you have only flexibly accessed part of your pension pot.

A P53Z should be used if you have withdrawn all your pension and also receive other taxable income.

If you have withdrawn all your pension and have no other taxable income, then you should use a P50Z form.