HMRC refunds worth £3800 issued to older Brits

Thousands of elderly Britons are being encouraged to verify whether they're entitled to money from HMRC worth approximately £3,800 on average.

You could be owed a refund from the tax authority if you were subjected to emergency tax after accessing your pension for the initial time. The most recent data reveals HMRC returned £48.7million in excessive pension tax between April 1 and June 30.

A total of 12,767 claims were handled altogether, with an average payout of £3,815. However, these welcome refunds come as younger Brits face missing out on £18,000 of their pensions due to major change.

You face the possibility of being levied an emergency tax if HMRC considers your initial pension withdrawal as though it will persist monthly, even if you make no additional withdrawals during that tax year.

Following pension liberty regulations implemented in 2015, you can typically take up to 25 per cent of your pension tax-free from age 55, with your standard income tax rate applied to the remaining 75 per cent .

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: "The overpaid pension tax saga continues to drag on. In just three months, HMRC has repaid a whopping £48.7million to people who paid too much tax for simply accessing their pension.

"With an average refund of around £3,800, these refunds amount to a significant chunk of change. The problem hits people who are taking a lump sum from their pension for the first time.

"They get taxed on what is known as a 'month one' basis, which means it's treated as though the same amount will come out every month. This results in a far bigger tax bill, which can come as an unpleasant surprise or even derail people's retirement plans."

Can I reclaim overpaid pensions tax?

Yes, you can claim back the difference between the amount you paid in emergency tax and the amount you should have paid at your normal tax rate by completing a form online. Alternatively, you can wait for HMRC to refund you at the end of the tax year.

You'll need to fill out one of the following three forms, depending on how you have accessed your retirement pot.

• If you've emptied your pot by flexibly accessing your pension and are still working or receiving benefits, you should fill out form P53Z
• If you've emptied your pot by flexibly accessing your pension and aren't working or receiving benefits, you should fill out form P50Z
• If you've only flexibly accessed part of your pension pot then use form P55

Ms Morrissey continued: "There are things you can do to mitigate it. For instance, you could make your first pension withdrawal a relatively small one.

"However, if you were looking to take a lump sum to fund travel or home renovations, for instance, you will need to plan ahead to make sure the money you take isn't whittled away by tax which could delay your plans.

"If you do get clobbered with a big tax bill, then you will need to fill out one of three forms so that HMRC can process the refund. Otherwise, you can wait until the end of tax year."