11/05/24
News, Resources, Insight and Opinion from Browning Financial Planning
HMRC repaid record £198m on flexible pension withdrawals
11/05/24
A record £198m was repaid on flexible pension withdrawals for the tax year 2023/24, latest HMRC data shows.
The data also shows that over £42m was repaid in the first three months of this year.
In total, over £1.2bn has been repaid by HMRC in overpaid tax on flexible pension withdrawals.
Almost a decade on from the introduction of the pension freedoms, the latest HMRC update shows the tax system continues to catch people out. Although the overpaid tax on pension withdrawals can be reclaimed using one of the various forms available, the data shows record amounts of tax continue to be overpaid. It also means that the HMRC keeps your money for months on end, when it could have remained invested in your pension plan.
There must be a better way of managing these withdrawals, especially if people are targeting a specific reason to use the money and find themselves short due to emergency tax being applied.
While we wait for the tax system to catch up with the freedoms, a good tip for people who are making a pension withdrawal for the first time is to request a small withdrawal of say £10. That will generate a tax code from HMRC, which the pension provider will apply to any subsequent withdrawals.
That will result in the tax taken at source being far more accurate in many more cases, not only reducing the burden of paperwork but, equally importantly, the customer receiving a more accurate withdrawal in the first place.
So, if you are needing to access the taxable part of your pension in the near future, contact us well in advance and we will set up an initial small payment to get the correct tax code, before we apply for the bigger payments.