In the first quarter of 2020, H M Revenue & Customs (HMRC) has already handed over £33m in overpaid tax to taxpayers who withdrew money from their pensions during Q1 2020, bringing the total to over £600m since 2015.
The tax authority published the data in April, revealing 10,400 pension flexibility claims forms were processed in Q1, making the 2019/20 tax year a record for emergency tax applied to pension withdrawals, with HMRC repaying a total of £166.6m.
Since the freedoms were introduced in April 2015, over £600m has been reclaimed in tax refunds. HMRC explains that if someone has recently changed their job or if they are subject to taxable benefits, they may have overpaid tax.
Tax paid on interest received as part of Payment Protection Insurance (PPI) compensation payouts could give you another reason to apply. PPI payments have an annual interest of 8% to reimburse claimants for the time they were short on money due to being mis-sold PPI.
Becky O’Connor, personal finance specialist at Royal London said:
“If you have received a payout for PPI compensation, it is worth checking the statement for details of any tax paid on the interest element of your refund.
If it was and tax was not due because the interest income was within your personal allowance or you are a non-taxpayer, you may be entitled to request a refund.”
She urges taxpayers to check if they have overpaid tax, adding:
“Always check your tax statement for the year and keep a note of any unusual changes to your income that might mean you have overpaid”
Claiming back overpaid tax
If you think you may have overpaid income tax on savings and investments, you can complete the ‘R40’ form on the HMRC website and can claim a refund for up to four previous tax years.
Where you may have overpaid:
- Pay from your current/previous job
- Pension payments
- Income from a life/pension annuity
- UK income if living abroad
- PPI or interest from savings
- Redundancy payment
- Self-assessment tax return
- Fuel/uniform for your job
Contact us to discuss your tax issues.