Excess pension freedoms tax of £22m repaid in Q1 2018
HM Revenue and Customs figures show £22m in overtaxed pension freedoms payments was repaid in the first quarter of 2018, prompting calls for reforms to the way withdrawals are taxed.
Savers have now had to reclaim £305m in overtaxed payments since the start of the new system in April 2015.
Tom Selby, senior analyst at platform provider AJ Bell, said: “While it is good that more than £300m has now been repaid to savers through the official forms, the reality is most people who are overtaxed do not fill out these forms and so rely on HMRC to reimburse them – a process that could take months.”
He said the level of overtaxation is therefore likely to be a lot higher than the official figures quoted by the government.
“We urge HMRC to at the very least review its approach to the taxation of pension freedoms withdrawals, which was never consulted upon and has already caused huge problems for hundreds of thousands of people,” Selby said.
Similarly, Steve Webb, director of policy at provider Royal London, called for reform to the way pension withdrawals are taxed.
“HMRC is perfectly happy to overtax tens of thousands of people each year and make them jump through hoops, having to choose between three different forms to complete and then wait to get their money back,” he said.
“It is time to move to a simple system where basic rate tax is withdrawn at source and any adjustment is made through year-end tax returns.”
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