Taxpayers reclaim £493m from HMRC
HMRC has had to return nearly half-a-billion pounds to taxpayers since April 2015, claims analysis of government statistics.
Royal London reports the Revenue is overcharging on two areas of the tax system, and has had to refund £493 million as a result.
Savers using the new pension freedoms are among the hardest hit, as income tax on pension withdrawals is taken on an emergency tax basis.
Taxpayers have had to claim back £262 million since the pension freedoms were introduced in April 2015.
The freedoms allow 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.
The other area highlighted by the analysis was extra stamp duty charged on ‘second homes’, which turn out not to be second homes.
This applies to people who have completed the purchase of a house before selling their current home, incurring 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.
Helen Morrissey, personal finance specialist at Royal London, said:
“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.
“And these figures do not 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 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 is 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.”
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