Leaked: Gov’t overtaxed UK pensioners by over £1 Billion – how to claim money back

According to the latest numbers, pensioners in the United Kingdom may have paid £1.01 billion more in pension tax than they should have.

HMRC has charged extra tax on early withdrawals from a ‘defined contribution’ pension account after pension flexibility regulations were implemented in 2015.

In this situation, HMRC would issue an emergency tax rate based on the assumption that the individual will withdraw that amount from their pension pool on a monthly basis.

For example, if someone withdraws £10,000 from their pension account in a given month, HMRC will tax them as if they were withdrawing £120,000 that year.

Pensioners must either register a claim directly with HMRC or wait for HMRC to review self-assessment payments and issue a refund to recover this money from the taxman.

In the first three months of this year, 15,800 people took matters into their own hands by filing tax refund applications, resulting in a £48.5 million reimbursement.

HMRC does not publicise the number of people who have received refunds following internal reviews, so the £1 billion figure could be higher.

Sir Steve Webb, a former pensions minister and now partner at LCP, described the system as a “disgrace” and said reform was “long overdue”.

He added: “A system based on systematic over-taxing of pension savers cannot be right.

“There is no good reason why citizens who access their pension should have to go through the hassle of claiming back excess taxation which they should never have had to pay in the first place.

“We are not talking about small sums, with over £1billion being paid back by HMRC so far.

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