The Government has been accused of hiding “figures in the small print” after HMRC admits that pensioners in the 2016-17 tax year actually paid £4.4billion more in tax than previously thought after making withdrawals from their pensions. The true figure was £17.9bn in tax, whereas until now, HMRC had admitted to only £13.5bn!
How does this happen? Well, since “pension freedoms” people over the age of 55 are able to draw from their pensions in what we call a “flexible way” or as they see fit, if you draw it too quickly (or happen to remain in work for example) then three-quarters of your withdrawal will be subject to income tax at your highest rate. Where you don’t take advice and withdraw it anyway, this can then lead to you paying too much tax. Whereas, if you had of received advice, we may have advised to withdraw over a couple of years and thereby reduce your tax bill!
As always, it depends on your circumstances and the one thing remains clear…independent advice on tax implications is vital. Contact your local experts before making changes or withdrawals and we will help ensure your very own Financial Fortress!