HMRC refunding millions to pensioners as some more | U.Okay.Finance News
HMRC is allotting millions in tax refunds to pensioners, with contemporary figures revealing retirees are pocketing an average of £3,800 for refunds processed between April 1 and June 30 this yr. The tax authority has handed back £48.7million during this period throughout almost 13,000 refund types. This payout stems from HMRC’s technique to calculating tax on pension income, utilizing what’s dubbed a “month one” calculation technique that makes use of a particular person’s first month of pension income to work out their potential tax invoice for the complete yr.The subject with this system is that the tax authority solely applies one-twelfth of a particular person’s annual tax-free allowances to the calculation, and it assumes the identical income will repeat each month regardless of retirees having flexibility over when and how a lot to withdraw. The calculation can work correctly if you happen to constantly withdraw the identical quantities out of your pension, which means the month one calculation intently mirrors your yearly income.But if you happen to withdraw one hefty lump sum out of your pension to final the complete yr, you will be stung with an extreme tax invoice as a result of HMRC’s calculation assumes you are receiving that large fee month-to-month somewhat than as a one-off. Helen Morrissey, head of retirement evaluation at Hargreaves Lansdown, warned This Is Money: “If you do get clobbered with a big tax bill, then you will need to fill out one of three forms so that HMRC can process the refund.”Otherwise, you possibly can wait till the tip of the tax yr.” To avoid overpaying tax, the expert suggested making a modest initial pension withdrawal, allowing HMRC to more accurately assess your tax obligations.Alternatively, if you have already paid too much tax, reclaim it using forms P55, P53Z, or P50Z, depending on your situation – details of which are available on the Gov.uk website. The government’s also provides a complimentary tool to check if you’re owed a refund and guides you through the claim process.Quilter’s head of retirement policy, Jon Greer, shared with GB News: “The latest pension flexibility statistics reveal HMRC’s remains to be combating the scourge of pension tax overpayment regardless of a streamlining the method of offering up to date tax codes for people who’re new to receiving a personal pension, from the present tax yr. In Q2 alone, 12,767 reimbursement claims had been processed, amounting to £48,701,927, with the yearly complete hitting round £92m. That’s almost £4,000 back in every taxpayer’s pocket on average for the quarter.”Despite HMRC’s April efforts to simplify tax for contemporary personal pension recipients by updating their tax codes, refunds have surged by over £4 million within the final three months compared January to March 2025.
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