Pension Drawdown - HMRC are an absolute joke

DRS1

Take some more later in the year.

OP This is something to consider. If you take a payment in May and it gets taxed but you then take another payment in March (even if it is a small one) that March payment can get you a refund of the tax over-deducted in May.

It happened to me a few years ago and because I wasn't used to the PAYE system I thought someone had made a mistake or paid two months in one go because the net payment was more than one month's gross should have been but oh no it was a tax refund.

What you need to do is make sure the only or final payment is made in March so that you get the benefit of all your personal allowance for the year instead of just one month of it. And it saves making a claim and fretting about what is taking so long

Working out the system and how to use it makes life easier and saves on the ranting.

horsewithnoname

https://forums.moneysavingexpert.com/discussion/6681340/pension-drawdown-hmrc-are-an-absolute-joke

Tell your MP you want public services properly resourced. That’s the real issue

mrklaw

two things can be true.

• this is the normal way that HMRC works so no need to get het up about it
• since pension freedoms perhaps HMRC could have adapted to accommodate retirees drawing down with a simpler system than PAYE systems use

p00hsticks

https://forums.moneysavingexpert.com/discussion/comment/82118736#Comment_82118736

The problem with the second option is how HMRC are expected to know what the retirees intentions are - whether a payment will be the only one in the year or part of a succession of payments, potentially of different amounts and at different times of the year .

Or should they simply take the retirees word for it ?

Knowing the history of making any any IT or admin changes in government, it's not something I'd personally want to see my tax money spent on as a priority (and I am one of the ones potentially affected, but am going to choose to set up a regular monthly income to avoid the problem )

SnowMan

https://forums.moneysavingexpert.com/discussion/comment/82118818#Comment_82118818

I do have some sympathy with the OP at least in terms of the time taken to process the P55.

But you've hit the nail on the head about why the system works in the way that it does. HMRC have no way of knowing whether a taxable withdrawal in say May is going to be the only withdrawal of the year.

When the P55 is sent to HMRC the claimant is essentially saying 'yes it is the only payment I'm going to take from this pension this year'. And obviously the claimant could lie about this take a further payment and then claim they've changed their mind. I'm not sure what would happen then, would the provider have knowledge of the P55 refund and hence the correct tax would be paid from the second payment, so the correct total tax but paid later than normal allowing for the P55 refund. But if they did the same thing the following year perhaps questions would be asked.

But you can understand that requiring the declaration (and tax correction) through the P55 rather than through a statement to the provider when the first payment is made, something which would more importantly require huge system changes at HMRC to implement, does make sense.

The current system is a mess though. I got a P55 refund of about 3K in 2024/2025 and HMRC then didn't take into account that I had been paid that refund and as part of simple assessment for that tax year wanted to pay me the 3K again in late 2025! I couldn't get HMRC to accept this was wrong and in the end had to complain to stop them paying me 3K I wasn't due. I thought things were resolved but then a few months ago they put a new simple assessment on my account for 2024/2025 which again missed the P55 refund. They then sent me a cheque for the 3K. When I rang HMRC up they at least quickly this time realised this was wrong and told me to tear up the cheque and not cash it. You wonder how many people have been in that same situation and just cashed the cheque!

MallyGirl

I have found it a bit of a challenge dealing with them in this interim time for me - redundancy last year, only taking up to £12570 this year then from next year I will be taking up to the 20% threshold. They have done some weird stuff - acknowledged that my employment was over but then adding a second employment at the same place with an estimated income of the remainder I would have earned in a full year; then adding private health and other BIK against HL when I took a small pot; then removing the health but leaving the other benefit against HL. I am still trying to get them to agree that 3 month employment means I only get 3 months BIK so the tax will be wrong when they finally calculate it for last year. No idea how long that will take. I had to write a letter to get the rogue employment entry removed. This year the non health BIK is still lurking and they have allowed for £1009 untaxed income from investments despite me drawing down less than £1000 pcm to stay under the 0% threshold so I have plenty of personal allowance to play with. I couldn't find any way to communicate all this via app/website so have resorted to writing another letter.

leosayer

I'm with the OP.

I hate the fact that HMRC help themselves to our money and then we have to wait months for the refund.

I moved to monthly drawdown to mitigate this and it helped to a degree but they're still taking too much tax and the system seems designed to make it impossible to correct in real time.

ali_bear

They make if very difficult to pay too little tax, so at least we can rest assured that there won't be a bill for unpaid coming down the track.

But they are too opaque in the way they make your tax calculations and terribly slow at issuing them. I know I paid too much last year - the year of my retirement - but I can't see any figures relating to it and have to just wait for it to come out, with a refund hopefully in the next couple of months.

juliedee4663

https://forums.moneysavingexpert.com/discussion/comment/82118465#Comment_82118465

I don't take it all in one go. That is just the first of a couple of instalments. Later payments obviously don't need me to apply for a tax refund.

dunstonh

https://forums.moneysavingexpert.com/discussion/comment/82119504#Comment_82119504

In which case, don't bother reclaiming. When you do your later withdrawals, it will start correcting. And if you do run in month 12 providing it's not too much out, it will fully correct itself.