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Claiming a tax refund on small pension withdrawals

Changes to pension rules mean that, from 6 April 2015, many people can choose to withdraw money from their pension pot in a variety of new ways.

It is very important that anyone considering making a withdrawal is aware of the tax implications before they make a decision: a choice that’s right for some people could lead to a large and unexpected tax bill for others. The tax on someone’s withdrawal will depend on their individual circumstances – for instance, their income, the amount they want to take and the number of withdrawals they plan to take.

The pension provider will have to deduct tax from the payment at an emergency rate based on 1/12th of the personal allowances and basic rate band if they do not have a P45. In most cases, this will mean that the person making the withdrawal may be due a tax refund.

In normal circumstances the repayment claim cannot be made until after the end of the tax year, when HMRC reconcile the PAYE.

Obtaining an early refund

As many of the pension withdrawals are from small funds HM Revenue and Customs have released a series of new forms in order to allow repayment claims in the year in which the withdrawal has been made.

It is very important that anyone considering making a withdrawal is aware of how they would be taxed. Professional tax advice should be obtained at an early stage.

If you have any queries or concerns regarding this please contact Angela Evans or your usual Moore Partner.


Angela Evans 01983 824810
angela.evans@moorestephens.com