A call has been made for thousands of elderly individuals in the UK to verify if they are entitled to refunds from HMRC, with an average sum of approximately £3,800.
If you withdrew funds from your pension for the first time and faced emergency tax, you might be eligible for repayment from the tax authority. Recent data indicates that HMRC reimbursed £48.7 million in overpaid pension tax between April 1 and June 30, handling a total of 12,767 claims with an average reimbursement of £3,815.
There is a risk of being subjected to emergency tax if HMRC assumes that your initial pension withdrawal will be a regular monthly occurrence, even if no further withdrawals are made within that tax year.
Following the introduction of pension freedom regulations in 2015, individuals can typically take up to 25% of their pension without tax implications from the age of 55, with the remaining 75% subject to standard income tax rates. This development follows reports about DWP state pensioners potentially receiving an additional £352 free of charge.
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Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, remarked: “The issue of overpaid pension tax persists. In just three months, HMRC has refunded an astounding £48.7 million to individuals who were taxed excessively for accessing their pensions.
“With an average reimbursement of around £3,800, these repayments represent a significant amount. The problem primarily affects individuals making their first lump sum withdrawal from their pension.
“The ‘month one’ tax basis applies, assuming a regular monthly withdrawal, resulting in a larger tax bill that can catch individuals off guard