RETIREES could be owed thousands of pounds from HMRC according to the latest figures.
When you first take cash from your pension, you might end up overpaying tax.
You could be cash when taking your pension for the first time
New tax figures from HMRC show the around 7,000 pension savers overpaid by a £33million in total in the last three months
That works out as £3,363 each, on average, but can be higher or lower depending on circumstances.
It’s because people who access one-off lump sums from their pension are taxed as if that will be their monthly income – meaning they often pay far too much.
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.
The money should be paid without having to do anything – but you could face a wait.
Jon Greer, head of retirement policy at Quilter said: “HMRC will make a repayment automatically, however given that could take time to be processed it is best to make a repayment claim yourself to avoid waiting.”
You can make a repayment claim yourself if you don’t want to wait. otherwise you’ll get it back at 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.
Mr Greer added: “This emergency tax situation can be particularly frustrating for people trying to access their funds quickly, particularly if they don’t understand why it has happened.
“It arises due to an oddity of the PAYE system when people start to take money from their pension.”
How do I get a tax refund?
You could be owed a refund if you’ve taken a lump sum out of your pension recently.
If it was the first time you’ve drawn down cash from your pension pot and if you took more than 25%, it is likely that HMRC owes you money.
You can claim your cash back from HMRC via a form either online or with a paper one sent by post.
The form you need to fill in will depend on how you accessed your pension.
If you have withdrawn all of your pension, and you’ve stopped working, you should fill in a P50Z form.
People who are still working but have emptied their pension pot should return a P53Z form.
But if you’ve just taken out a chunk, you need to submit a P55 form.
It could take up to six weeks for your money to be returned.
The government has just announced a change to pension tax relief meaning low-paid workers will get an extra £53 added to their pension pot.
And thousands of people are missing out on pension credit – leaving them £3,300 down – check if it’s you.