HMRC Pension Tax code rules are changing - here's how to claim it back

Millions of pensioners have been put thousands of pounds worse off, after HMRC is set to scrap a costly tax code error. The problem was with the emergency tax codes on pensions. This was brought in as an emergency tax code following the pension reforms in 2015. From April 2015, new 'pension freedoms' allowed people to no longer have to take an annuity, and instead, withdraw the money in small amounts or even as a lump sum. HMRC had removed extra tax from further amounts drawn from pension funds, often on the assumption that this would be month one' of a series of payments throughout the rest of the tax year. Recommended reading: Then pensioners had to claim their overpaid tax back. This tax error has led to HM Revenue & Customs (HMRC) paying out more than £1 billion in overpaid pension tax since the rule change. You may be due a refund from HMRC if you are over 55 (the minimum age at which you can take your pension pot, although this is rising to 57 from 2028) and have taken a taxable lump sum from your pension, or withdrawn your whole pension pot at once. You can claim your money back right away, and even if you do nothing, HMRC should return the overpaid tax to you by the end of the tax year (31 May). To receive your money before the new tax year, you will have to fill out one of three different forms. This should mean that the correct amount of tax is deducted in real time. The HMRC newsletter confirming this change said: "'We will also automatically update the tax code for customers who are on a temporary tax code and would benefit from being on a cumulative code - so they don't suffer an overpayment or underpayment at the end of the year," the HMRC newsletter confirming this change said. "'This means that those who, for the first time, begin to receive ongoing pension payments will benefit from this change. There is no need to contact HMRC and once a tax code has been changed we'll inform customers by letter or digitally if they've signed up for paperless in the HMRC app or online."'

Shandor Brenner is an American journalist recognized for his sharp and insightful reporting on social and political issues. His work is known for its depth, integrity, and the ability to highlight critical societal concerns.