Grieving families unfairly taxed

BEREAVED families may have been mistakenly taxed on payouts from their relatives’ pensions due to a blunder by HM Revenue & Customs.

Relatives who have been awarded a lump sum payment from a family member’s pension scheme after their death could have been wrongly charged income tax on it.

Death benefits paid to the dependants of savers with final-salary pensions who die before the age of 75 are meant to be tax-free.

HMRC admitted it had incorrectly sent tax code notifications to pension providers, which means many people may have been unfairly charged.

However, in a response to a Freedom of Information request from pensions firm Royal London, the taxman said it did not know how many had been affected.

An HMRC spokesman says: ‘HMRC was made aware that [tax code] notices were being issued in error and issued guidance to administrators on what to do to ensure the sums were not taxed whilst it investigated. HMRC is testing the solution and is sorry for the delay.’

Anyone who has received a lump sum death benefit payment since 2016 should check with the pension firm whether they were taxed and contact HMRC on 0300 123 1079 to arrange a rebate.