Pension update as HMRC pays back millions in overpaid tax – could you get a refund?

2 mins read

Those drawing from a flexible pension are the ones who have been impacted. Flexible pensions allow people to access some of their retirement savings, while they leave the rest to keep accumulating interest

In many cases, people can draw up to 25 percent of their pension savings and receive a lump sum tax-free. However, anything over that amount will be taxed.

As such, people drawing a large amount as a one off could be put on an emergency tax code and be taxed as though that large amount will be their regular income throughout the year.

Because people accessing lump sums from their pensions will initially be taxed as if they will take the same sum every month for the rest of the tax year, those taking a one-off lump sum are likely to pay far too much tax on it.

READ MORE: Cold Weather Payment scheme has started – are you eligible for a £25 cash boost?

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