Flexi Pension Lump Sum Taxation – And How to Reclaim it

June 10th, 2015

Many people taking out a lump sum from their Pensions via the new flexi-access rules have found themselves hit with an unwanted tax bill, and the hassle of having to reclaim the owed money back from HMRC. As always, please get in touch if you’re looking to review your pension and look at the possibility of taking a lump sum via the flexi-access rules – however please see below for a guide on how to reclaim the money owed to you.

There are three main forms to use to get your over deducted tax back without having to wait until the end of the tax year.

  1. If you took your entire pension fund and have no other income in the year you need form P50Z
  1. If you took your whole pension but have some other taxable income eg from work or benefits, you need form P53Z
  1. If you have taken cash from your pension fund but not withdrawn the entire amount and are not making any other withdrawals in the same tax year then you need form P55

In situations 1 and 2 the pension provider is likely to provide you with a form P45 to help with the claim.

The forms can be accessed on-line or at the Post Office and it is estimated that refunds will take up to 30 days.

If your circumstances don’t match one of 1-3 above then it seems that you will have to wait until the end of the tax year to tidy up your affairs and get any tax back through the self-assessment system. HMRC will usually work out the over payment and repay it automatically.

Finally, it’s worth noting that once you have taken more than just tax free cash from a pension fund you need to tell the providers of any other pension funds you are paying into as your annual contribution maximum will then fall from £40,000 to £10,000.