Pension withdrawal forms
There has been huge press coverage of the new pension freedoms which allow those aged 55 or more to withdraw their pension savings as cash lump sums. What has received less attention is the tax effect of doing this. If your clients have already accessed their defined contribution pension pots they may have suffered an unexpected tax charge.
Unless the individual can provide a current form P45 which tells the pension company what PAYE code to use, the pension company will deduct tax using an emergency code. That will generally mean that too much tax is deducted and the individual needs to claim a tax refund either on their self-assessment return after the end of the tax year, or by using one of these new forms within the tax year:
- P50Z- if the entire pension pot is taken and the individual has no other income;
- P53Z - if the entire pension pot is taken and the individual has some other income;
- P55 - in other circumstances such as where only part of the pension pot is taken.
All three of the new refund forms must be completed online, and then printed off to submit to HMRC. However, there is a problem with form P55 which has incorrect instructions.
Form P55 should allow the taxpayer to reclaim the tax deducted within 30 days, but the online form said this was not possible. Following an article in the FT newspaper at the weekend it appears that form P55 has been temporarily withdrawn from the GOV.UK website to fix the wording.
This is an extract from our tax tips newsletter dated 14 May 2015. The newsletter itself contained links to related source material for this story and the other two topical, timely and commercial tax tips. It's clearly written and extremely good value for accountants in general practice. Try it for free by registering here>>>
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