HMRC pays back £33million in overpaid pension tax – are you due a refund?
BRITS dipping into their pension pots have been paid back £33million from HMRC this year.
Savers could get money back because they have paid too much tax when accessing their retirement cash.
Nearly 10,000 people overpaid in the first three months of the new tax year from April to June.
They got back £3,379 each on average from HMRC.
You can start taking money from a personal or workplace pension from the age of 55 in a number of ways, including as a lump sum.
Usually you can take the first 25% of your pension tax-free, and anything over that is taxed.
But when taking a lump sum you can be taxed at an emergency rate and end up paying more than you have to.
Anyone who overpays tax can get it back by claiming a refund from HMRC, otherwise they should get it back automatically, but they will have to wait until the end of the tax year.
The exact amount you can get back if you overpay depends on how much money you took from your pension, what other income you have (if any) and your tax rate.
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Savers can access their pension "flexibly" following changes in 2015 and it means people can do more with their money, including taking some cash and continuing to work.
The majority of savers who got tax back in recent months accessed only some of their pension pot and were not taking regular payments from it.
Far fewer savers - less than 3,000 - withdrew their entire pension, according to the latest data published by HMRC.
More than £700m has been refunded in total since then due to the tax quirk according to Which?.
An HMRC spokesperson said: "Nobody will overpay tax as a result of taking advantage of pension flexibility.
"Individuals can claim back any overpayment due to an emergency tax code being applied immediately and we will repay this in 30 days. Anyone who does not claim will be automatically repaid at the end of the year.”
How to claim your cash back
You can claim your cash back one sent by post.
The form you need to fill in will depend on how you accessed your pension.
P537 - use this if you accessed your pension flexibly and took all of your money but also have other income that's taxed, for example from a job
P55 - use this form if you accessed your pension flexibly and only took some of your pension money and are not taking regular payments from it
P50Z - use this from if you accessed your pension flexibly and took all of the money but don't have any other income that's taxed
Once you've completed the form you should get the cash back within 30 days.
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