Pension holders to be refunded £54 million of overpaid tax
New figures released by HM Revenue & Customs (HMRC) have revealed that it handed back more than £54 million to people who had overpaid tax on pension withdrawals in the last three months alone.
The latest quarterly data for 1 July 2019 to 30 September 2019 is the highest figure since pension freedoms were introduced in 2015.
HMRC processed 10,379 P55 forms for flexibly accessed pension overpayments, along with 5,253 P53Z forms for small pension lump sums and 1,753 P50Z applications in this time.
As a result of this, HMRC was required to pay out a total of £54.97 million and it means that the total amount of ‘emergency tax’ on withdrawals, which has since been repaid to savers is now £535 million.
Former Pensions Minister, Steve Webb, said: “Even by their own low standards, HMRC has outdone itself the last three months, taking more than £54 million of savers’ money in income tax to which they were not entitled.
“It cannot be right that tens of thousands of people each year have too much tax taken out of their pension and then have the hassle of filling in a form to get back money that is rightfully theirs.”
Overpayments tend to arise due to how the current rules are laid out. Currently, when someone makes a pension withdrawal, HMRC assumes that they will go on to make more withdrawals in the same tax year.
This may mean that some people are pushed into a higher tax bracket under emergency coding. In order to recoup this money, pensioners are required to complete either a P55, P53Z or P50Z form.