Do you have a financial anxiety, dilemma or quandary? Ask Jessie Hewitson, veteran money journalist and editor, and new financial agony aunt for The i Paper. Jessie is answering readers’ questions while consulting with the top experts in the field (many of whom charge high fees) to get readers the very best advice. She will combine this with her own life experiences, which includes not always making the most sensible financial decisions in her personal life. Email questions to money@inews.co.uk, with Ask Jessie in the subject line and she will get to work.

Dear Jessie,

I was medically retired in 2022 on mental health grounds, I have never or will ever work again.

Since I retired, my tax has been in chaos. I had a large Self-invested Personal Pension with Hargreaves Lansdown, which is taxed at source as I draw down [my pension income] each month. Yet every year, HMRC says my previous tax years were “tax due” [tax due previously] years, and when I complained, they ignored the complaint. I called twice, yet all they say is what is on their computer screen is correct and refuse to investigate my issues.

It seems every year I owe tax with no explanation as to why? My tax code has also been changed without proper explanation. More than £300 was owed to me for the tax year 2023/24 yet I have no evidence this has been paid. All they say is it’s paid through my tax codes.

What can I do?

D.C. via email

Jessie responds…

We exchanged a few more emails and you sent me more specific calculations, but the main issue is I don’t think you fully understand the tax system – which most of us don’t. And this may be why you are having problems with HMRC.

The money you are taxed at source (via PAYE, where your pension provider pays your income, deducting the tax due before you receive your money) is not a final calculation. It is only an estimate of the tax due. And this common misconception, is, I think, what is confusing you.

PAYE usually collects the right amount of tax when income is simple. But not always, and when you have multiple sources of income – you have a final salary pension through Royal Mail, as well as your SIPP, and potentially the state pension too – the chances of it being wrong increase.

When this happens, a new tax code is issued – the code notifies your pension provider that you need to pay more or less tax the next year.

By suggesting you don’t understand this is not meant as a criticism, because you are not alone, and the majority of us are in your camp: bamboozled by our highly complex and sometimes downright illogical tax system.

Another factor is that you are drawing down from your private pension (the SIPP) – which means you are keeping money invested while taking some money out. This can mean uncertainty from HMRC’s point of view as to how much money you will take, and how much tax you need to pay. This uncertainty can mean that any initial PAYE tax coding notice for a tax year may be wrong.

Another scenario when you have more than one pension is that HMRC potentially doesn’t write to one of your pension companies and tell them which one will claim personal allowance, or the provider didn’t record this correctly and both providers claim it.

This would mean you pay less tax, but then HMRC will pick it up and expect to be paid the difference the following year. It would also trigger a new tax code.

Also, the state pension is taxable, and lots of people don’t realise this. If your collective pension income (by which I mean the total money you get from your state, private and workplace pension) is above £12,570, you pay income tax.

But the tax on state pensions is a bit weird in that you don’t pay it straight away, like you do with income tax or national insurance if you are employed, which is deducted from your income via PAYE. If tax is due, your other pension income is reduced to cover the charge. Again, your provider will be told to do this by an adjusted tax code.

I showed your emails to Robert Salter, partner at the accountancy firm Blick Rothbenberg. He said from the information you have given us, it is entirely possible you are paying the correct amount of tax, and HMRC is giving you the right tax codes.

However, it’s also possible you are being over-taxed. Mr Salter has seen plenty of cases where HMRC just gets it plain wrong.

He adds that your frustrations with HMRC are not uncommon and he has wondered if the staff are only given a certain amount of time to conclude their calls.

You have two options to try and resolve things. You could see if you are eligible for support from one of the tax charities, which help people who can’t afford accountants. These are TaxAid or Tax Help for Older People.

They can review what tax you have paid for the last years and, for example, correspond with HMRC on his behalf if there is any errors. The other alternative, if you can afford it, is to pay an accountant.

Your letter highlights that drawdown is great in many ways – it helps us grow our money while we are spending some of it in retirement – but it also means you are having to worry about tax at an age where it potentially gets more draining to stay on top of these things.

I put it to Mr Salter that tax can be both boring and complicated, which is a deadly combination and why so many of us put off having to think about it. He agreed on the complicated point, but he doesn’t find that it boring.

It may be a stimulating challenge for a chartered accountant, but for the rest of us, it’s one we could do without.