Thousands Unaware Government Owes Them Money
Thousands of people need to be made aware that they are paying too much tax and can claim it back.
The way tax rules are being implemented in regards to accessing pension pots is leaving many out of pocket. In particular it is the “month one” rule that means potentially one-off withdraws are being counted as occurring every month when tax bills are calculated.
£40,000 taken out as a one-off would be calculated to mean an annual withdrawal of £480,000 which would incur tax of £16,428.56 whereas if £40,000 was also the yearly total only £5,798 of tax should be paid.
The option to get tax back from H.M.R.C. is there but so far only 10,998 people have claimed back their overpaid tax per quarter whereas the F.C.A. noted 139,000 instances of individuals accessing their pension pot in the same amount of time.
The reasons behind the lack of action being taken by individuals is not yet known. A.J. Bell’s senior analyst Tom Selby thinks “this might be because they don’t know they have paid too much tax or the process to reclaim it just seemed too complicated.”
The rules stating whose responsibility it is to claim back the money owed is however far clearer. Mr Selby says that “it is up to individuals to check whether they have paid too much tax and to make a claim, they are unlikely to get any help from the government.” This is why it is so important that financial advice is sought.
Lack Of Financial Advice A Major Factor
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