What is a P50Z?
Form P50Z is for reclaiming tax paid on a flexibly accessed pension payment received in the current tax year.
When you choose to withdraw a lump sum from your pension by flexibly accessing your pension fund, your pension provider will deduct income tax before disbursing the funds to you.
In general HMRC permits 25% of a pension lump sum to be withdrawn tax-free with any amount beyond that threshold typically subject to tax.
The tax deducted from your lump sum is often calculated at the emergency tax rate, which could result in you paying too much income tax.
The P50Z form is designed to make this process of claiming back your overpaid pension tax easier and quicker meaning your money should be returned in around 30 working days of HMRC receiving your form.
Who should use form P50Z?
Form P50Z is for retired taxpayers who meet all of the following criteria:
- Taken a cash lump sum from their pension;
- Emptied their pension pot with this ‘flexibility payment’; and
- Received a P45 from their pension provider.
In these circumstances if you still have other taxable income you should see form P53Z.
Form P53Z criteria
If you meet the three criteria above and at least one of the following:
- You have retired for good without a pension from your last employer.
- You are studying full time.
- You are not claiming any taxable benefits (Employment and Support Allowance, taxable Incapacity Benefit, Jobseeker’s Allowance).
- You have been unemployed for more than 4 weeks.
- You do not intend to return to work.
When should you not use a P50Z?
You would not normally need to fill in form P50Z if you meet one, or more, of the following criteria:
- You are claiming taxable benefits.
- Your ‘flexible’ payment has left some money in your pension pot.
- You are not a UK resident for tax purposes.
- You are starting a new job within 4 weeks.
- You receive an occupational pension, your pension provider will make the repayment or you can reclaim directly from HMRC after 5th April.
There is likely to be another tax form that is applicable to your specific situation if you don’t meet the P50Z criteria.
You should consider using HMRC forms P55, P53 and P53Z which can all be used to claim a pension tax rebate depending on your tax position.
How to submit the P50Z to HMRC
You have three options for getting your P50Z to HMRC.
- Firstly, through your GOV.UK personal tax account. They take about 15 minutes to set up.
- Secondly, you can fill in the form on your computer, then print it and post it to HMRC.
- Thirdly, you can just print off the form, complete it by hand and then pop it in the post to the address on the form.
If you need to speak to someone about your form P50Z you can phone HMRC on 0300 200 3300 and depending on the nature of your pension query you could get in touch with your pension provider or the tax charity tax help for older people.
Can I reduce the amount of tax I pay on a lump sum from my pension?
In certain situations it’s possible to either not pay income tax on your pension earnings or employ techniques to decrease the taxable portion of your pension lump sum.
One strategy to bring down your pension lump sum tax bill is to restrict withdrawals to only the necessary amount for each tax year.
When receiving pension income or taking a lump sum you can sometimes lower your tax liability by ensuring that your overall taxable income remains under the higher or additional rate tax thresholds.
