PENSIONERS AMONGST THOSE OVERPAYING TAX DUE TO QUIRK IN HMRC SYSTEMS
The Making Tax Digital campaign, designed amongst other things to prevent instances of taxpayers overpaying and needing to wait until the tax year end in order to receive a refund, has been officially scaled back by HMRC due to Brexit requirements. However, the system changes made to date have thrown up some flaws.
In some instances, those receiving large bonuses early in the tax year have found that the system assumes that this amount will be received each month, vastly overestimating the person’s annual income. Where the figure exceeds £100,000 this has resulted in a reduction or even elimination of their personal allowance.
Pensioners have been affected too. Under the changes, which were introduced in April 2015, those aged over 55 are able to take regular or ad hoc amounts from their defined contribution pension pots. A problem arises if someone were to make a large withdrawal in a single month, the tax system would then assume that this will be their income each month and would tax them on an “emergency rate”. Many have consequently been hugely over-taxed due to this flaw. To make sure you’re not paying more tax then you need to speak to us.
Tax treatment depends on individual circumstances. Tax treatment, rates and allowance are subject to change.
The value of pensions and investments can fall as well as rise. You may get back less than you invested.
Tax Planning is not regulated by the Financial Conduct Authority
Fill in the form below and one of our experts will be back to you within 24 hours.