People withdrawing lump sums from their pension pots will avoid sometimes heavy end of year demands for under payments as the UK’s Customs and Excise (HMRC) moves to update a system described by one expert as “scandalous”. Since private pensions were overhauled in 2015, enabling recipients to withdraw money in chunks, HMRC applied an emergency tax code. As a result a total of £1.37bn has been paid to taxpapee reclaiming over payments. The move will remove the need for form filling and make financial planning easier. HMRC said: “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.”
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