HMRC has warned people to be wary of pension withdrawals
Brits have been advised to think carefully before tapping into their private pension pots. It follows warnings that some seemingly “helpful” guidance could result in a substantial tax bill.
HM Revenue and Customs (HMRC) stated that certain schemes offering tax relief or additional income can constitute tax avoidance – leaving people not only with unexpected tax bills but also interest and penalties. The tax authority issued an alert via a post on X, saying: “Think twice before accessing your private pension pot. It may count as tax avoidance and could end up costing you more than you expect.”
This comes as experts say some unscrupulous advisers are targeting workers with schemes that sound too good to be true. HMRC emphasised that everyone is responsible under UK law for paying the correct amount of tax, even if they rely on someone else’s advice.
The tax authority highlighted that payments made outside the official tax rules are classified as unauthorised payments, and tax charges are payable. These include most lump sums taken before age 55, lump sums exceeding £30,000, and continued payments after a member’s death.
Payments made due to incorrectly calculated pension transfers or annuities can also be classified as unauthorised. “Unscrupulous firms are using misleading information to promote personal loans or cash incentives, enticing savers to unlock their pension pots early,” HMRC warned.
“There is no legal loophole – these transactions are unauthorised payments.”
Unauthorised payments are subject to three tax charges:
- A 40% unauthorised payment charge, payable by the member (or employer if applicable).
- An additional 15% unauthorised payments surcharge if 25% or more of a pension pot is withdrawn in a year, bringing the total tax payable to 55%.
- A scheme sanction charge of 40%, payable by the scheme administrator on most unauthorised payments, loans, or investments in taxable property.
Members can settle the tax either through a mandate permitting the scheme to deduct it, or via Self Assessment. HMRC emphasised that ignoring the issue only escalates the bill.
Think before you leap
HMRC’s recent reminder comes as experts warn that some advisers are enticing workers with schemes promising extra income or tax relief, which are in fact avoidance schemes. Tax avoidance typically involves artificial arrangements created solely to minimise tax.
Workers should be cautious of payments that don’t align with their payslip, untaxed loans, or capital advances. Those entangled in such schemes face the owed tax, plus interest and any fees already paid to the scheme promoter.
Seek assistance before it’s too late
Anyone suspecting involvement in a tax avoidance or unauthorised pension scheme should contact HMRC immediately. “Ignoring the problem is not the answer. The longer you leave it, the bigger the tax bill,” the authority cautioned.
Support is available to safely exit schemes, and payment plans can be arranged for those unable to pay all at once. Dubious schemes can be reported online or by telephone on 0800 788 887 (or +44 (0)203 0800 871 from outside the UK). Reports can be submitted anonymously using code ‘TAC’.
![Heathrow has said passenger numbers were 60% lower in November than before the coronavirus pandemic and there were “high cancellations” among business travellers concerned about being trapped overseas for Christmas as Omicron spreads. The UK’s largest airport said the government’s travel restrictions had dealt a fresh blow to travel confidence and predicted it was likely to take several years for passenger numbers to return to pre-pandemic levels. This week ministers said passengers arriving in the UK would have to take a pre-departure Covid test, as well as a post-flight test, because of fears about the spread of the new variant. “[The] high level of cancellations by business travellers concerned about being trapped overseas because of pre-departure testing shows the potential harm to the economy of travel restrictions,” the airport said in an update. Heathrow said the drop in traveller confidence owing to the new travel restrictions had negated the benefit of reopening the all-important corridor to North America for business and holiday travel last month. Eleven African countries have been added to the government’s red list, requiring travellers to quarantine before reuniting with families. “By allowing Brits to isolate at home, ministers can make sure they are reunited with their loved ones this Christmas,” said John Holland-Kaye, the chief executive of Heathrow. “It would send a strong signal that restrictions on travel will be removed as soon as safely possible to give passengers the confidence to book for 2022, opening up thousands of new jobs for local people at Heathrow. Let’s reunite families for Christmas.” Heathrow said that if the government could safely signal that restrictions would be lifted soon, then employers at Heathrow would have the confidence to hire thousands of staff in anticipation of a boost in business next summer. The airport is expecting a slow start to 2022, finishing next year with about 45 million passengers – just over half of pre-pandemic levels. This week Tui, Europe’s largest package holiday operator, said it expected bookings for next summer to bounce back to 2019 levels. However, Heathrow said on Friday not to expect the aviation industry to recover for several years. “We do not expect that international travel will recover to 2019 levels until at least all travel restrictions (including testing) are removed from all the markets that we serve, at both ends of the route, and there is no risk of new restrictions, such as quarantine, being imposed,” the airport said.](https://wordupnews.com/wp-content/uploads/2026/02/shutterstock_1100012546-scaled-400x240.jpg)
![Heathrow has said passenger numbers were 60% lower in November than before the coronavirus pandemic and there were “high cancellations” among business travellers concerned about being trapped overseas for Christmas as Omicron spreads. The UK’s largest airport said the government’s travel restrictions had dealt a fresh blow to travel confidence and predicted it was likely to take several years for passenger numbers to return to pre-pandemic levels. This week ministers said passengers arriving in the UK would have to take a pre-departure Covid test, as well as a post-flight test, because of fears about the spread of the new variant. “[The] high level of cancellations by business travellers concerned about being trapped overseas because of pre-departure testing shows the potential harm to the economy of travel restrictions,” the airport said in an update. Heathrow said the drop in traveller confidence owing to the new travel restrictions had negated the benefit of reopening the all-important corridor to North America for business and holiday travel last month. Eleven African countries have been added to the government’s red list, requiring travellers to quarantine before reuniting with families. “By allowing Brits to isolate at home, ministers can make sure they are reunited with their loved ones this Christmas,” said John Holland-Kaye, the chief executive of Heathrow. “It would send a strong signal that restrictions on travel will be removed as soon as safely possible to give passengers the confidence to book for 2022, opening up thousands of new jobs for local people at Heathrow. Let’s reunite families for Christmas.” Heathrow said that if the government could safely signal that restrictions would be lifted soon, then employers at Heathrow would have the confidence to hire thousands of staff in anticipation of a boost in business next summer. The airport is expecting a slow start to 2022, finishing next year with about 45 million passengers – just over half of pre-pandemic levels. This week Tui, Europe’s largest package holiday operator, said it expected bookings for next summer to bounce back to 2019 levels. However, Heathrow said on Friday not to expect the aviation industry to recover for several years. “We do not expect that international travel will recover to 2019 levels until at least all travel restrictions (including testing) are removed from all the markets that we serve, at both ends of the route, and there is no risk of new restrictions, such as quarantine, being imposed,” the airport said.](https://wordupnews.com/wp-content/uploads/2026/02/shutterstock_1100012546-scaled-80x80.jpg)
