How To Claim A Flexible Access Pension Tax Refund

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Millions of retirement savers jammed help lines to find out how to claim a tax refund on money taken from their pensions under the new flexible access rules.

The cash chaos has lit up switchboards at pension providers, HMRC and the new free advice service Pension Wise.

On the first day, HMRC’s telephone help lines crashed under the weight of a million calls.

The problem for retirement savers is pension freedom comes with some restrictions.

The main financial issue is that unless a saver can provide a valid P45 to show how much they have earned in the tax year to date, HMRC has told pension providers to calculate tax payments on pension withdrawals under emergency coding rules.

The saver must reclaim any over payment of tax by filing one of a bewildering array of claim forms with HMRC.

“Providing this procedure is followed, the taxpayer should have their refund within 30 days of us receiving the claim,” said an HMRC spokesman.

Here’s a step-by-step guide to making the claim:

Claiming the refund depends on how you have taken the payment from your pension:

Single lump sum drawdown

If you drawdown your pension as a single lump sum instead of taking monthly income, the first 25% is free and income tax is paid on the balance.

It’s likely the provider will work out the tax payment according to your emergency coding, which probably means you have paid too much tax.

To reclaim the balance, you can either:

  • File a self-assessment tax return – but this means the money is unlikely to be repaid until the end of the February following the end of the financial year when the payment was made if you delay the filing until the January 31 deadline
  • Complete a Form P53 to claim the refund – following the link also gives a 10 page guide to filling in the form.

Flexible access drawdown

HMRC advises how you claim if you have overpaid tax on a flexible access pension withdrawal depends on other financial factors, such as:

  • Do you have other taxable income?

If so, download and complete a Form P53Z

  • Did the payment use all the cash in your pension?

If so, download and complete a Form P50Z

  • The final option is if the withdrawal left money in your pension but you do not intend to take another flexible access payment in the tax year, download and complete a Form P55

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