Pension tax is something which many Britons will hope to avoid, but in some cases it is necessary. However, what can be particularly frustrating is overpaying on tax – an issue which can crop up for many retirement savers.
Issues have occurred since the introduction of pension freedoms in 2015, which mean people can withdraw from their pension either in small amounts or as a lump sum.
However, if accessing a pension for the first time, Britons could find themselves at the mercy of an emergency tax code – meaning they pay more on their pension.
If a person makes a large withdrawal in the first month, the tax system expects this sum to be the monthly income across the whole year.
As a result, people find themselves taxed, potentially way outside the amount they actually need to be.
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But how can Britons endeavour to get this money back?
The Government points individuals towards online and portable forms – P53 and P53Z to claim tax back.
Alternatively, individuals can use the online service.
Recent research showed over 55s were wrongly taxed some £143million last year, simply for accessing their pot for the first time.
On average, savers needed to claim back £3,248 each in 2021 after being overcharged.
“The system is run purely for the administrative convenience of HMRC rather than the benefit of taxpayers.”
However, if a person has overpaid on tax, HMRC explains it will help people to claim the tax back.
There is a portal on the Government website designed for this very purpose.
An HMRC spokesperson previously told Express.co.uk: “Nobody will overpay tax as a result of taking advantage of pension flexibility.
“Individuals can claim back any overpayment due to an emergency tax code being applied immediately and we will repay this in 30 days.
“Anyone who does not claim will be automatically repaid at the end of the year.”
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