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Are you paying too much tax on your pension drawdown?

Emergency Tax Code and HMRC

When you first commence income drawdown bear this in mind;

When the first pensions freedom withdrawal is made it is treated as the first of ‘continuing payouts’ by HMRC, even if it is a one-off. An emergency tax is applied taking into account continuing payouts, and is usually higher than the pension taker usually accesses.

Some believe that the problem is much worse than the official figures make out.

Financial Conduct Authority (FCA) figures suggest some 150,000 pension pots are accessed for the first time each quarter – which would indicate many more have been overtaxed.

“In reality the vast majority of people who are overtaxed aren’t filling out the official reclaim forms, meaning the amount of emergency tax paid by savers will be much higher than this official figure,” said Tom Selby, senior analyst at AJ Bell.

FOR INVESTMENT ADVICE REGARDING YOUR PENSION OR OTHER INVESTMENTS PLEASE CONTACT Elliott Wilson ACSI DipPFS AF3

 

While we keep information on the website as up to date and as accurate as possible, the information on this website does not form part of our advice process. Cambridge Pensions Ltd cannot accept any liability for any decisions made by a client or member of the general public based on any information contained on this website. The value of your investments can go down as well as up and you may get back less than has been paid in.

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