17 January 2022
If you are covering the latest HMRC tax overpayment statistics, please see the following comment from Jon Greer, head of retirement policy at Quilter:
“Once again, pension savers are being caught out by our clunky pension taxation system, which has resulted in HMRC repaying pension savers over £42m in the last quarter 2021. This amounts to an average tax payment of £3,107 per saver in the fourth quarter as a result of the incorrect amount of tax being charged on pension income.
“Over the course of 2021, £142m was repaid by HMRC to pension savers, with the bulk of this in the third and fourth quarter of the year, implying that that more and more pension savers are dipping into their pensions in the latter half of the year.
“More often than not, these overpayments result from emergency tax being applied, often when people start to take money from their pension. It’s a little known quirk of the PAYE system that often results in considerable tax overpayments.
“This highlights the importance of getting financial advice before touching your pension. HMRC will make a repayment automatically, but this could take some time so if you want a refund to come through more quickly, then make a repayment claim yourself to avoid waiting for HMRC.
“Working with someone who knows and understands the system and can plan your financial affairs thoroughly with you will reduce the risk of lost income being handed to the tax authorities, or if it is taken then helping your reclaim it speedily and effectively.”
