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Where Taxpayers and Advisers Meet
HMRC Will Take Emergency Tax from People Cashing In Their Pensions
08/04/2015, by Lee Sharpe, Tax News - Savings & Investments, Pensions & Retirement
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Several news sources - including the BBC - are highlighting that pension companies are basically obliged to follow the normal Pay As You Earn (PAYE) regime when making withdrawals under the new "flexible" rules.

This may result in a nasty surprise for many early adopters who wish to access their cash early or "in lumps" since, under PAYE, the pension provider is obliged to give only a month's worth of tax-free pay and basic rate band, unless the pensioner is able to provde a valid P45 or already has a tax code for that source. Both seem quite unlikely where people are intending to draw down funds for the first time, or as an annual event.

To be fair to HMRC, their guidance seemed reasonably clear, once issued. And the new Pension Wise section of HMG's website seems also to be a decent attempt, although I do wonder about how many face-to-face meetings there will be, should someone wish to avail himself of the "Talk to a Guidance Specialist" facility. Surely not as few meetings as were reportedly available to replace walk-in enquiries at tax offices, when they were shut down with unseemly haste. 

But I do look somewhat askance, at HMRC's apparent promise that "any PAYE tax over-deducted will be refunded within 30 days". 30 days of when, or what, exactly? Proof of the puddding, and all that.

For further information about tax and the new flexible pension rules, please see LITRG's 

Taking Money from a Pension? Watch Out for Tax!

About The Author

Lee is TaxationWeb's Articles & News Editor and writes for TaxationWeb. He is a Chartered Tax Adviser with experience of advising individuals and owner-managed businesses over a broad spectrum of tax matters.
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