HMRC provide new forms to suport tax refunds for ‘pension freedom’ withdrawals

Individuals who withdraw lump sums from their DC pension pots using the new freedoms that came into effect on 6th April 2015 should be aware of the possibility of emergency tax being applied to the withdrawal if it is via a flexi-access drawdown or Uncrystallised Pension Fund Lump Sum (UPFLS). Unless the pension provider has a current P45 they are required to deduct emergency tax and the individual will have to claim a refund using the following new forms:

P50Z – individual members should only use the P50Z form if:

  • They’ve taken a pension flexibility payment that uses up all their pension pot and they have no other income

P53Z – individuals should only use the P53Z form if:

  • They’ve taken a pension flexibility payment that uses up all their pension pot and they do have other taxable income in this tax year

P55 – individuals should only use the P55 form if:

  • They’ve taken a pension flexibility payment that does not use up all of that fund, and
  • Tthey have only taken one payment and do not intend to take a further payment from the same pension scheme this tax year, and
  • The pension provider is unable to make any tax refund

There are more details on the various scenarios that can lead to an unexpected tax deduction in the Pension Schemes Newsletter at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/420650/Newsletter_68.pdf