Is your pension being taxed too much?

Dominic Thomas
July 2025 • 2 min read

Income from your pension and a little less conversation

For those of you who have been using the 2015 pension freedoms to access lumps of money from your pensions, there is some good news (I hope).

As of 6^th April 2025, if you are taking lump sum income (or indeed regular income) from your pension there ought to be less hassle from HMRC. If you have already done this with your pension, you will know that the pension company have to adhere to HMRC tax rules and invariably have to ‘over-tax’ your pension income, meaning that you have to reclaim it via a P55, P53Z or P50z form from HMRC. In fairness, this process has been improved a lot and cases tend to be resolved within 6-8 weeks. However, only if you reclaim it!

HMRC have confirmed that this system (which has resulted in pensioners being over-taxed to the tune of £1.3bn since 2015) is finally set to be overhauled following years of campaigning.

Since the system was put in place, over 470,000 claims totalling £1.37bn have been made for refunds. In Q4 of 2024 £49.5m was repaid to the 14,612 people who submitted forms.

From April, HMRC has announced that it will move much more quickly to replace these ‘emergency’ tax codes with regular tax codes, which will make sure that the correct amount of tax is deducted in real time. Hopefully this will reduce the need for form-filling to claim back over-paid tax, particularly where people make multiple withdrawals in a single tax year.

HMRC Announcement

HMRC made the announcement in its latest ‘Pension Schemes Newsletter’ (January 2025 Number 166) in an article entitled ‘helping customers get on the right pension pay faster’.

“From April 2025 we are improving how tax code information is used for those people who are new to receiving a private pension, so they pay the right amount of tax from the outset. We will automatically update the tax code for customers who are on a temporary tax code and would benefit from being on a cumulative code — this means they’ll avoid an overpayment or underpayment at the end of the year. There is no need to contact HMRC and once a tax code has been changed we’ll inform customers by letter or digitally if they’ve signed up for paperless in the HMRC app or online.

You do not need to make any changes to your tax coding process as we will automatically change these codes. However, as we’re systematically changing the tax codes for these customers you will receive notices for tax codes that have been automatically adjusted as they happen. As well as benefiting customers who will receive the right pension pay quicker, you may also see a reduction in queries you receive on tax code errors.

This small change is part of our wider commitment towards improving our customer service experience.”

So, hopefully a little less paperwork, but expect ever more access and accountability through the new HMRC app (which I have not yet tried myself). You may not be dancing in the aisles, but I’m reminded of Elvis…

A little less conversation, a little more action, please

All this aggravation ain’t satisfactioning me

A little more bite and a little less bark

A little less fight and a little more spark

Close your mouth and open up your heart and, baby, satisfy me …

So … why not … well done HMRC!

Here is the Official JXL Remix video of Elvis Presley – A Little Less Conversation

Come on – how many tax blog posts manage to link to Elvis?!

BACK TO ALL BLOGS

Financial Planning and Elvis

Solomons-financial-advisor-wimbledon-blogger

Financial Planning and Elvis

It is undoubtedly true that Elvis is one of the most famous singers in history. His fans continue to enjoy his music long after his death (one of the greatest legacies of art) and his music continues to be reworked and performed. We all know of the claims of vast numbers of Elvis impersonators.

Elvis rose from a very modest background and to some extent epitomized the American dream. At the time of his early death (age 42 in 1977), it is said that he had about $5million in the bank (around $20.5m by today’s measures). Of course there was also property, notably his recently renovated with 1970’s glitz Graceland; Elvis could also spend… as has been well documented.

Thankfully he had a Will of which there were just three beneficiaries, his father Vernon, grandmother Minnie Mae and his daughter Lisa Marie. His father was the Executor. Thanks to a good relationship with his ex-wife Priscilla, who whilst not being a beneficiary, became the sole Executor following the deaths of Vernon (1979) and Minnie Mae (1980).

A little less conversation ?…

Priscilla was presumably one of the few people that said “no” to Elvis. A recent film (Elvis and Nixon) reflected (how accurately it is unclear – “based on true events”) some of the excesses and delusions that Elvis suffered. In this story he asks Nixon to make him a spy or Federal Agent. It would appear that his persuasive powers and charm secured him such a status, however nominal.

What has this got to do with financial planning? Well, Elvis is perhaps a more extreme example, but his experience is common to celebrities, who are often surrounded by people who rarely, if ever, appear to question, challenge or oppose some of the decisions being made. We can all think of examples of albums, books, performances or appearances, where the celebrity in question really should have said “no” and it appears that nobody else, those closest, said as much. I very much doubt that being a celebrity is all its cracked up to be, in fact I’m fairly sure it is a lonely and rather uncomfortable status. Yet we are all prone to blindness. We all wrestle with denial of reality.

I believe that a great financial planner, does not simply help you to secure your future, but also acts as a reality check, someone to challenge your assumptions and plans without envy or malice. Without this, presumably only friends and family have such proximity to be able to serve a similar purpose, but is that really likely? Or even fair? You may be surprised to learn how often I am with couples who at some point in our meeting say “you never told me that… I didn’t know you wanted to do that… this is the first time I have heard you express that”.

Of course others may be able to provide some form of counsel, I’d suggest that was healthy, but a financial planner, has a unique collection of hard and soft “facts” about you to provide a far better opportunity for you to grapple with the building a future based upon who you really are and who you wish to be. We all have talents, but sometimes our abilities in one area of our lives fool us into thinking we can handle others that appear “easy”. This is not the sole preserve of celebrity. We all have versions of ourselves, but an honest reflection without judgement is a value that may well be priceless.

As for the movie, well if it is true, its unbelievable… (but I enjoyed it) so here’s the trailer.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk