HMRC are reminding individuals who have flexibly accessed their pension to check if they have overpaid income tax.
From the age of 55 you have the option to withdraw a portion of your pension, typically around 25% without paying taxes on it. However the remaining three quarters or 75%, of your pension savings are subject to taxation as regular income.
A refund may be claimed when an excessive amount of income tax has been paid for a pension payment that was accessed flexibly.
It’s important to know that your pension provider doesn’t normally have the ability to issue a tax rebate and not all refunds are repaid automatically.
If you have not made a claim during the tax year, HMRC will review all of your PAYE records once the tax year has ended. In the event that you have not paid the accurate amount of tax, HMRC will send you a P800 tax calculation.
This calculation is designed to show any overpayments of tax that have not been claimed within the tax year. Any refund of tax will then be sent to the via cheque or can usually be reclaimed online though your personal tax account.
Sometimes the system may fail resulting in no communication from HMRC or an incorrect P800 calculation.
This means you to take the initiative to understand your own situation and make a claim through a P55 or claim under a double taxation agreement if you are non resident.
HMRC form P55 and submitting online
If you withdraw a portion of your funds from a pension account without taking any more cash withdrawals before the tax year ends you have the option to request a tax refund (if applicable) by completing form P55.
You can complete and submit the form P55 online through gaining access initially through your government gateway account.
If you don’t have a government gateway user ID and password you can easily create one when you start using the service.
There is an option to download the form so you can post it to HMRC instead to Pay As You Earn HM Revenue and Customs BX9 1AS.
Until HMRC checks have been completed it’s essential to retain any documents that pertain to your application.
Upon completion of the tax year HMRC double check that you have been reimbursed the exact amount and if not HMRC should let you know if you are owed a further refund or underpaid tax.
When self assessment tax return is a requirement
For those who have to complete a self assessment tax return you should not include any estimated self assessment income when submitting this claim unless you would like it to be included when calculating your repayment.
Any repayment of income tax repaid due to P55 claim should be reported on the relevant tax years self assessment tax return by completing the “tax refunded or set off box” in the tailor your return section of your online return.
You will still have to make the balancing payments and payments on account when they are due; you can ask us to use your repayment to reduce any payments on account.
What is required to submit a P55?
In order to calculate your tax rebate HMRC will need to determine the amount of money you anticipate to obtain from the pension fund during the tax year of your claim beginning on April 6th and concluding on April 5th.
In the same year you’ll have to inform us about the amount of funds you are expecting from:
- The data of the pension provider which should include the name, address, and PAYE reference.
- An employer – information of the employer who is providing you with income from paid employment, which should your name, address, and PAYE reference.
- Taxable state benefits including Employment and Support Allowance and Jobseeker’s Allowance.
- State Pension.
- Employer benefits for example a health scheme or company car.
- Any UK pension plans and any pension flexibility lump sums.
- Self employment profits.
- Dividends from UK corporations.
- Taxed and untaxed interest from UK savings and investments.
- Gift Aid payments.
- Any other sources of income such as property.
Your personal tax account or the HMRC app are really helpful resources when trying to find the information you need to complete a P55.
How to receive your P55 tax refund
Any tax refund you are owed will generally be paid by BACS to a bank account in either your name or your nominee’s.
You can also choose to be sent a cheque by post if you would prefer.
P55 help and support
HMRC are there to help but you may have to wait a while to speak to them on the phone. You should have your national insurance number ready so you can pass HMRC security checks.
Elderly people who have a restricted budget can also receive free assistance with their taxes from the independent charity Tax Help for Older People who provide support over the phone, by email and in person.
You can find out more about other HMRC forms which relate to tax rebates and pension payments here:
- HMRC form P50 if you have stopped working.
- HMRC form P50Z for drawdown pension payments.
- HMRC form P53Z if you have taken your whole pension pot from a flexibly accessed pension.
