Pensioners claw back £400m from HMRC

Pensioners claw back £400m from HMRC

The taxman has been forced to repay more than £400m in overpaid tax since the introduction of pension freedoms in 2015, according to data from HM Revenue and Customs (HMRC).

According to figures released today (January 30), the taxman repaid £30.2m during the last quarter of 2018 to almost 14,000 people.

According to analysis from Royal London, HMRC has had to pay back tax on 174,000 occasions since Q2 2015, with the total amount repaid now standing at £402m.

With the introduction of pension freedoms in 2015, savers have been able to take advantage of the high transfer values of defined benefit schemes and to move their nest eggs into defined contribution plans, which they could then draw an income from.

But these withdrawals are taxable at an individual's marginal rate of income tax.

Where the provider does not have the correct tax code for the individual, withdrawals are taxed using a higher rate emergency tax code, which routinely results in a tax deduction which then has to be reclaimed.

According to Helen Morrissey, pensions specialist at Royal London, HMRC "is utterly shameless in the way that it over-taxes people and then expects them to claim a refund. 

She said: "The system should be run for the convenience of taxpayers, not the convenience of HMRC. It is time that this over-taxing spree was brought to an end."