Royal London reports the reason there has been such a high volume of reclaims is because the Revenue is overcharging on two areas of the tax system.
The first is with the new pension freedoms. This allows the over-55s to take their entire pension pot as a lump sum, with the first 25% tax-free and the rest taxed as if it were income.
Savers using the new pension freedoms have however been amongst the hardest hit as income tax on pension withdrawals is taken on an emergency tax basis. Since the pension freedoms were introduced in April 2015, taxpayers have had to claim back an incredible £262 million.
The other area highlighted by the analysis was extra stamp duty charged on ‘second homes’ which don’t actually turn out to be second homes. This has affected buyers who have completed the purchase of a house before selling their current home and as a result have incurred an extra 3% stamp duty charge on the transaction.
Since April 2016, a total of £231 million has been refunded to homeowners who were overtaxed in this way. If you think that you may have been affected by either of these issues, please ask us about how our tax planning services can help you.
Helen Morrissey, personal finance specialist at Royal London commented:
“Taxes like the second home stamp duty were designed to clamp down on buy-to-let landlords, not people whose house sale took longer than they expected.”
“Moving house is already a stressful enough activity without having to pay thousands in extra tax to HMRC and then have to claim it back. These figures don’t even include the people who are overtaxed without realising it and never claim a refund.”
Steve Webb, director of policy at Royal London, believes the Revenue is “out of control” and suggested that the government is “enjoying some extra interest until the money is claimed back”
Former pensions minister Webb added:
“HMRC operates a system of tax first, ask questions later. It’s time to speak up for ordinary citizens who are forced to pay excessive amounts of tax and then go through the hassle of claiming it back.”
If you’re concerned that you could be paying too much tax, please contact PKB Accountants about our tax planning services and we will be able to advise.