Have You Paid Too Much Tax on Your Pension?
Around
two hundred thousand savers are believed to have paid too much tax
using the new pension freedoms. This is available to savers who are
over the age of fifty five. The problem is that many of these saves
have no idea that they have paid too much on tax, which is why so
many pension advisors are asking clients to thoroughly check on the
tax they have paid.
One-Off
Withdrawals
The
reasons that many of the people using this pension freedom is any
one-off withdrawal is being seen the first regular pension payments.
This means that HMRC is generating a tax code that is Month One. This
means that they deduct as if the withdrawal is the first one of many
and as a result, there are thousands of individuals who may have
overpaid in taxes in the 2016/17 tax year.
Information
provided by a Freedom of Information request showed that two hundred
and forty two people made one withdrawal from their pension, as this
is the most popular feature of the pension freedom new rules. Only
just over forty two thousand people who were overcharged has
completed the relevant forms for that period. This means that there
are almost two hundred thousand who have no idea that they were
overpaying on their withdrawal.
Up
to date, HMRC has repaid almost £27 million from April to July this
year. This was to those who realized that they had overpaid and had
taken relevant steps to rectify the situation. This means that HMRC
are not rectifying the problem themselves. Therefore I recommend that
anyone who took a single withdrawal from their pensions get in
contact with a professional financial advisor to identify if they
have overpaid and take the relevant steps to rectify the situation
quickly and effectively.
Going
forward the rules need to be changed so only the basic tax rate is
deducted and addition tax be collected via the normal tax return
process, this way clients are more inclined to spot any problems and
have them rectified.
Professional
Advice
With
so many people having already overpaid on taxes for their one-off
withdrawals, we recommend that any clients who want to consider
taking advantage of this opportunity discuss the matter with a
professional financial advisor before taking any steps to ensure that
they only pay the basic tax required.
Comments
Post a Comment