July/Aug 2019
EDITION

VIEW ONLINE
SUBSCRIBE

Register with PP

Newsletter, Jobs & Event Alerts

Latest

HMRC pensions freedoms overtaxing decried as ‘shameless’

6 February 2019

HM Revenue & Customs has taxed pension savers over £400 million since the pension freedoms were introduced in 2015, new data has shown, with one commentator decrying the practice as “shameless”.

HMRC routinely taxes savers using the emergency tax code when it does not have the correct tax code, resulting in large payments which savers have to individually reclaim.

In the final three months of 2018, £30 million was returned to savers. Since the second quarter of 2015, HMRC has had to pay back tax on 174,000 occasions amounting to £402 million, with the average reclaim standing at £2,312.

However, Tom Selby, senior analyst at AJ Bell, said the figures are not the full picture as they fail to capture people who don’t fill out the forms.

He said: “HMRC’s insistence on applying emergency tax to hard-working savers’ first pension freedoms withdrawals continues to harm those who access their own money flexibly.

“What these figures don’t capture is those who don’t fill out the forms. Given 150,000 pensions per quarter have been accessed for the first time, it appears far more people either don’t know they have been penalised or are unsure how to go about getting the money back. This is hardly surprising given many savers who use the pension freedoms will have never filled out a tax return before.”

Selby said that given this system had been continuing for close to four years, with HMRC refusing to review its approach, policymakers should be urged to “think again” and work with the industry “to find a better solution.”

Helen Morrissey, pensions specialist at Royal London, took a stronger line calling the overtaxing “shameless” of HMRC.

She said: “HMRC is utterly shameless in the way that it over-taxes people and then expects them to claim a refund. 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.”

Number of refunds processed by HMRC


Source: AJ Bell