overpaid tax

HMRC Pays Back £925m in Overpaid Tax

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havenifa


Posted on: 17th November 2022

November saw a startling revelation that HM Revenue and Customs (HMRC) paid back over £900m in overpaid tax on pension withdrawals since 2015.

This has become known in the headlines as the ‘Quiet Scandal’ in the UK tabloids, hitting the already stretched-thin pockets of thousands of Britons without them being aware. No person wants to pay more tax than legally required, but the latest data published by HMRC has showcased the tax department having to pay back over £900 million in income tax overpayments.

Pension Withdrawals

The issue arises when it comes to pension withdrawals, made possible with the introduction of pension freedoms in 2015. Under current HMRC rulings, when a person takes a lump sum from defined contribution pensions, the tax is deducted at source. However, in place of the tax being deducted at a normal income tax rate, HMRC issued an emergency tax rate instead.

The problem then arose as the system presumed the individual was making multiple withdrawals over the year, collectively taking them to a higher tax band. This overpaid tax is just an additional hit during the cost of living crisis, but it can still be reclaimed.

Form Filling

One way to get the tax back quicker is to fill out a government form, but overpaid tax is generally paid back at the end of the year. Former pensions minister Sir Steve Webb has recently sounded the alarm on the scene to make pensioners aware of the implications. Over the last three months, over 10,000 people have submitted claim forms to be refunded to a collective tune of £33 million.

With the quarterly figures added together since 2015, the total refund amount stands at £925 million. This is in respect of 270,000 claim forms, although there is the possibility that some individuals have filled in multiple forms. Many people may be left not understanding or knowing how to fill in a form and choose to wait for a refund when they eventually fill in their tax return – sometimes a whole year later.

Getting Back What’s Yours

The quiet scandal comes from individuals every year having to fill in forms to get back tax from HMRC that they never should have had to pay in the first instance. With the heavy-hitting winter period, individuals may need an additional hand in helping them get their claims back sooner. That solution would be to talk with their independent financial advisers Cheshire to know the best course of action and aid in getting their forms submitted.

Contact the team at Haven IFA today for independent financial advisers Manchester who can provide help with your financial issues.

Posted in Tax