Revenue stands firm on taxation of flexi pension payments

HMRC has no plans to change the way it taxes flexible pension drawdown payments. In the latest edition of the Pension Schemes Newsletter  the department states it has ‘concluded that any changes at the current time would not significantly improve the tax position for the majority of recipients of a flexible drawdown payment when compared to the process currently in place. The existing PAYE treatment of flexible pension drawdowns remains the most effective method of deducting tax in these cases and it reduces the risk of underpayments of tax arising.’

However it adds that it will continue to review and monitor drawdowns and related claims.

The system whereby HMRC uses a PAYE emergency code to tax pensioners making flexible withdrawals from their pension savings often results in overpaid tax which has to be reclaimed.

Tom McPhail head of policy at Hargreaves Lansdown said: ‘This is a...