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Pension tax overpayments hit £56 million

Pension tax overpayments shot up to £56 million in the second quarter of 2023.

This marks an increase of almost £8 million from the first quarter of the year, says HM Revenue & Customs (HMRC).

This total is nearly double the £33.7 million that was overpaid during the same period last year.

During this quarter, around 16,000 forms to claim back overpaid tax were processed, with the average amount claimed back coming to £3,551. This is the second-highest figure since pension freedoms were introduced in 2015.

Over the last eight years, people aged 55 and over who have overpaid tax on their early pension withdrawals have claimed back almost £1.1 billion.

The need for people to claim back overpayments has come up because people taking money out of their pension pots early have generally been charged emergency tax, which is usually much higher than the amount they actually owe.

The data suggests that a growing number of people aged 55 and over are making use of their pension freedoms, with some saying this is because of the cost-of-living crisis.

The HMRC data also showed a drop in the number of transfers into qualified recognised overseas pension schemes (Qrops), going down from 3,900 in 2021 to 2022 to 3,250 in 2022 to 2023.

Despite this, the total value of these transfers went up from £517 million to £680 million over the same period.

If you are worried that you might have paid too much tax on pension withdrawals in the past, please get in touch.


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