TAX REFUND WHEN YOU GET A PENSION: What if you paid too much tax on a private pension?

As a rule, you get an automatic refund through your pension provider. They will pay you back – in most cases.

But, there may be times when the pension provider does not pay back the money.

In cases like these, HM Revenue and Customs will post a P800 tax calculation to you. This usually happens before the end of September.

The P800 might tell you to claim a tax refund online, and how to do it. In this case you should go ahead and claim it that way.

Your P800 might also say that HMRC are sending you a cheque (also called a ‘payable order’). If so, you should get it within 14 days. Being owed tax from more than one year means you get a single cheque that covers the entire amount.

As a rule, HM Revenue and Customs do not send out notification of tax rebates by email. You should always report suspicious emails to HMRC so they can take further action.

You may need to call HM Revenue and Customs to tell them why you think you overpaid such as if:

• Your pension provider does not make an automatic payment and you need a refund in the current tax year.
• You did not get a P800 tax calculation.

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Retired and only getting the State Pension

Fill in the form titled ‘Income Tax: claiming tax back when you have stopped working (P50)‘.

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Taken Cash from the Pension (or a lump sum)

Taking cash or a lump sum can affect tax when you get a pension. You can pay too much if it is partly tax-free from either:

• A defined benefit pension scheme.
• A defined contribution pension scheme.

Lump Sums from Defined Benefit Schemes (trivial commutation)

Lump Sums from Defined Benefit Schemes (trivial commutation)

Those who fill in a Self Assessment tax return each year will get a refund after you send in the return. But, not everyone fills in a tax return.

If not, use the form ‘Income Tax: repayment claim when small pension taken as a lump sum (P53)/(P53Z)‘ to claim your refund.

Cash from Defined Contribution Schemes (e.g. lump sum or ‘drawdown’)

• Use form P50Z if the payment used up your pension pot and you have no other source of income in the tax year.
• Use form P53Z if the payment used up your pension pot and you do have other taxable income.
• Use form P55 if the payment did not use up your pension pot and you are not taking regular payments. This form only applies when your pension provider is unable to refund you.

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Bought a Pension Annuity after April 2007

Tax gets taken through PAYE on a pension annuity if it got bought after April 2007. This works in the same way as a work-based pension or a personal pension.

HM Revenue and Customs will post a P800 tax calculation to you. This usually happens before the end of September. HMRC will send you a cheque (also called a ‘payable order’) within 14 days. There is no need to do anything else.

Inheriting Money from a Pension

There are different ways of claiming overpaid tax on an inherited pension pot. It depends on other income and whether the payment uses up the all the pension pot or part of it.

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Tax Refund on a Lifetime Annuity

Lifetime annuities are often called a ‘purchased life annuity’. Overpaying tax on income from a life annuity you bought means you can claim tax back.

A life annuity usually pays a guaranteed income for life. You can buy them from an insurer who will exchange it for a lump sum.

Often, some tax gets paid ‘automatically’ on life annuity payments (at the 20% rate). But, if you do not need to pay Income Tax due to your Personal Allowance, then you can:

• Request a tax-free income from the lifetime annuity.
• Reclaim any overpaid taxes.

Asking for Tax Free Income

Use form R89 and send it to the company paying the annuity. Use form R86 if it is a joint life annuity.

Note: You must inform the company that pays the annuity if your income increases. Tax may be liable if your income goes above your Personal Allowance.

Reclaiming Tax

Note: Use form R40 for each tax year that you think you overpaid tax.

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Deadline for making a Claim

Claims must get made within 4 years of the end of the tax year that you claim for. Further help and advice is available from:

HMRC Retirement Annuity Helpline
Calling from abroad: +44 (0)151 471 8436
Monday to Friday: 8am to 8pm
Saturday: 8am to 4pm
Telephone: 0300 200 3302
Find out call charges to 0300 numbers.

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