If you’ve taken money out of your pension, you may have paid too much tax. How do you claim a tax refund? Find out how to claim back tax on pension payments.
How to claim back tax on pension payments
If you’ve taken money out of your pension, you may end up paying too much tax. Under the pension freedoms introduced in April 2015, you can take lump sums out of your pension. However, depending on how you take the money out, you may pay too much tax. You can claim this tax back.
SAVVY TIP: It’s not the pension company’s fault that you’ve paid too much tax – it’s HM Revenue and Customs that insists on taxing money you take from your pension in a certain way.
For example, if you’re taking out a lump sum you may be taxed as if you’re taking out the same lump sum every month.
Claiming tax back on pension payments
You can claim any overpaid tax back from HM Revenue and Customs and you should normally get the money back within 30 days of making the claim. If you don’t claim the tax back, it should be repaid to you by HM Revenue and Customs, but this may not happen for some months.
There are different forms that you have to use, depending on how you took money out of your pension. It’s not exactly straightforward, but it’s important you use the right form. So, here goes…
If you cashed in your pension in full
If you’ve cashed in your pension in full, the form you have to fill in depends on whether or not you have any other pensions or sources of income.
- Use form P53 if you have a small final salary (or other salary-related pension) and can cash it in under the ‘trivial pension’ or ‘trivial commutation’ rules. I’m sorry about the appalling jargon. It simply means if you have a relatively small salary-related pension, you can take the whole lot as cash. You can read about this in my article called Cashing in a small final salary pension fund – how the trivial pension rules can benefit you.
- Use form P53Z if you cash in your pension pot type of pension (otherwise called a defined contribution pension) in full and have other pensions or sources of income (including benefits).
SAVVY TIP: You can find the forms P53 and P53Z on the Gov.uk website. This link takes you to a page that has the online versions of the P53 and P53Z forms (which you have to be registered for the Government Gateway to use) as well as versions that you can download, print and return.
- Use form P50Z if you cash in your pension pot type of pension (otherwise called a defined contribution pension) in full but do not have other pensions or sources of income. You can find different versions of form P50Z on the Gov.uk website.
If you’ve taken a lump sum out of your pension
If you’ve taken a cash payment from your pension, but not cashed it in in full, then you may have to use form P55.
- Form P55 if you took money out of your pension, but didn’t cash it all in, and don’t have any other sources of income in that tax year. You can find various versions of form P55 on the Gov.uk website.
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