HMRC has provided information about how to deal with overpayment and underpayment of tax on pension income.
With the introduction of pension Flexibilities and people making ad hoc payments from their pension plans, there is an increased chance that some people may have overpaid or underpaid income tax. HMRC has published advice on what to do if an individual has overpaid or underpaid tax during the tax year, and will notify them between now and October 2015 via a P800 tax calculation.
What the individual needs to do
If they get a P800 tax calculation, they should check the details are correct.
- compare the figures used with their own records, such as a P60, P11d, bank statements or letters from the DWP.
- use the HMRC tax checker to check how much tax they should have paid. HMRC tax checker – check now.
If the calculation is correct, no further action need be taken.
If they’ve underpaid tax
If they haven’t paid enough tax, HMRC will usually change the tax code for the next year to collect the money owed. This happens automatically so they won’t need to do anything. Sometimes HMRC can’t collect the money owed through a tax code, for example, if they no longer have an income source against which PAYE operates. In this case, HMRC will write to the individual explaining how to pay the money owed.
If they’ve overpaid tax
If they have paid too much tax, HMRC will automatically send a cheque within 14 days of receipt of the P800. The individual won’t need to do anything further.