McCloud and tax: refunds, charges, and what HMRC actually does

Tax is the bit of the McCloud remedy almost everyone gets wrong. Usually in one of three ways. Some members assume the scheme will sort it out automatically; mostly it will not. Some assume the original tax year is closed forever under the standard four-year self-assessment rule, so no adjustment is possible; the McCloud framework exists precisely to reopen those years. And some get the right idea but the wrong document, mistaking the choice statement for the savings statement, or filing on the original figures instead of the revised ones.

This page is the field guide to the tax side of the remedy. It explains who gets a refund, who owes more, which document does which job, what HMRC‘s framework actually provides, and which deadlines have already passed. It is the companion to our Remediable Service Statement walk-through and our McCloud Remedy explainer; if you have not read those, this post will still make sense, but the two together give you the full picture.

Two documents, two jobs: RSS and RPSS

The single most common confusion in the tax side of the remedy is between two documents that look similar, share most of an acronym, and are sent by the same scheme administrator. They do different things.

The Remediable Service Statement (RSS) is the choice document. It compares legacy and reformed (2015) benefits for your seven-year remedy slice and, depending on whether you are in the Immediate Choice or Deferred Choice Underpin cohort, either asks you to choose now or tells you the choice is deferred. The RSS is about benefits.

The Remediable Pension Savings Statement (RPSS) is the tax document. It sets out the revised pension input amounts, year by year, for any tax year in the remedy period where the rollback has changed how much pension growth you are deemed to have made. The RPSS is what you put into the HMRC service to recompute Annual Allowance charges. The RPSS is about tax.

Some schemes issue both documents in the same envelope. Others issue the RSS first and the RPSS later, sometimes much later. NHSBSA, for example, has explicitly described the RPSS as a separate workstream from the RSS. You can have one without the other; checking which has arrived is the first thing to do when an envelope from your scheme lands.

If only your RSS has arrived and you are sure you paid an Annual Allowance charge in one of the remedy years, contact your scheme and ask when the RPSS will follow. The RSS, on its own, is not enough to file the tax adjustment.

What the rollback does to your tax position

For the seven tax years from 6 April 2015 to 5 April 2022, the McCloud remedy treats most affected members as if they had stayed in their legacy scheme for that period (the rollback). Where the rollback changes your pension input amount for any of those years, three things can follow.

• An Annual Allowance refund. If your rolled-back pension input amount is lower than the figure used at the time, and you paid an Annual Allowance charge in that year, the charge is reduced. The difference is owed to you (or to your scheme, where the scheme paid the original charge under Scheme Pays).
• A new or higher Annual Allowance charge. Less commonly, the rollback can raise a pension input amount, or push a marginal year over the threshold. In that case there is a new charge to pay.
• A change in lump-sum allowance test. If you took a benefit during the remedy window that was tested against the old Lifetime Allowance, the rollback can change the result. The Lifetime Allowance was abolished from 6 April 2024 and replaced by the Lump Sum Allowance and the Lump Sum and Death Benefit Allowance; the McCloud framework still adjusts pre-April-2024 LTA tests where the rollback affects them.

One frequent source of confusion: the Annual Allowance figures are not the same in every year of the remedy window. The standard allowance was £40,000 from 2015/16 to 2022/23, before rising to £60,000 from 6 April 2023. The taper rules also moved. The £200,000 threshold income / £260,000 adjusted income / £10,000 floor structure that applies for 2026/27 only began from 6 April 2023; earlier remedy years used the older taper limits. The HMRC service applies the right year’s figures automatically. So “your Annual Allowance” is not a single number across the seven years; it is seven different numbers, one for each year, and on the older years a tapered allowance can sit some way below the headline.

The three groups: who is affected by tax

Most members in the remedy window will not need to file anything. A meaningful minority will. The split is not always obvious from the documents themselves, which is partly why the framework exists in the form it does.

Group 1: members who paid an Annual Allowance charge in a remedy year

This is the cohort the framework was built for. If you paid an AA charge for any tax year from 2015/16 to 2021/22, either through your Scheme Pays arrangement or directly to HMRC through Self Assessment, the rollback may change that charge. Your RPSS sets out the revised pension input amounts; the HMRC service compares them to the originals and works out any refund or extra charge.

Most members in this cohort end up owed a refund, on the simple basis that the legacy schemes were generally less aggressive on pension growth than the reformed (2015) schemes for higher earners. But not always. A consultant whose remedy years were on a flat or declining salary can in principle owe more, and the framework reports both directions of travel honestly.

Group 2: members who were close to the Annual Allowance but did not breach it

The rollback can move you across the line in either direction. If you were close to the standard allowance, or close to the tapered Annual Allowance threshold (because your income was high enough to put you within the taper), the revised pension input amounts may now produce a charge you did not previously have, or vice versa.

Members who had or were close to the tapered Annual Allowance are particularly worth flagging here, because the rollback can change both your pension input amount and your adjusted income for those years. The HMRC service will recompute both. Doing this by hand is genuinely difficult; this is one of the few situations where letting the digital service do the calculation is the more reliable route.

Group 3: members near the old Lifetime Allowance

If you took any pension benefits during the remedy window that triggered a Lifetime Allowance test (typically a benefit crystallisation event such as drawing your pension, taking a tax-free lump sum, or transferring overseas), the rollback can change the percentage of the LTA used at that point. The framework adjusts the historic LTA test even though the LTA itself was abolished from 6 April 2024. Where the test is reduced, you may be due a refund of LTA charges paid at the time. Where it is increased, the rules around the post-April-2024 Lump Sum Allowance and Lump Sum and Death Benefit Allowance determine what flows from the change.

This group is smaller in number than groups 1 and 2 but the sums involved per case are usually larger. If your benefits were ever tested against the LTA, this is a section to read with both your RPSS and your historic benefit-crystallisation paperwork to hand.

Why HMRC built a separate framework

UK tax rules normally close a Self Assessment year four years after the end of that tax year. Once the window is shut, neither HMRC nor the taxpayer can ordinarily reopen it. The McCloud remedy needed to reach back further than that: 2015/16 had been closed for years by the time most schemes started issuing remedy statements.

The Finance Act 2022 (and subsequent regulations) created a bespoke statutory route for this single purpose: the Calculate your public service pension adjustment service. It is the only mechanism that can reopen a closed remedy-period tax year for an Annual Allowance or Lifetime Allowance change driven by the rollback. Filing changes through the normal Self Assessment system instead does not work; HMRC’s published guidance is explicit that all such changes go through the dedicated service.

The service walks through the calculation step by step, using your RPSS as the input. It works out the change in your Annual Allowance position, applies any tapered allowance correctly, and tells you whether you owe HMRC, are due a refund, or have nothing to report. If the calculation comes out neutral, no submission is required.

One detail worth knowing: the service is for the member, not for an agent. Tax advisers cannot use it on a client’s behalf in the way they can use a normal Self Assessment account. The exceptions are members with a power of attorney, deputies, and legal personal representatives of deceased members; those routes are explicit on the service’s “Make a submission on behalf of someone else” page.

Scheme Pays or paying HMRC directly: the two routes

If the calculation produces a new or increased Annual Allowance charge, you have two ways to pay it. The choice mirrors the original Annual Allowance system, with adjusted McCloud-specific deadlines layered on top.

Scheme Pays

You can elect for the scheme to pay the charge from your future pension benefits. There are two flavours: mandatory Scheme Pays (where the scheme is required to accept the election if the charge meets statutory thresholds, broadly an AA charge of at least £2,000 in a year and a pension input amount above the standard allowance) and voluntary Scheme Pays (where the scheme can accept the election outside those thresholds, at its discretion). Most public-service schemes operate both.

For McCloud-specific charges, the mandatory Scheme Pays election deadline is later than the original Self Assessment deadline. The dates are 6 July 2025 for active and deferred members on 1 October 2023, and 6 July 2027 for members who were pensioners (or legal personal representatives of members who had died) on 1 October 2023. Both dates are statutory.

If you miss the mandatory deadline, you can still ask the scheme to pay. The scheme will usually agree if it has the information it needs. The difference is liability: outside the mandatory window, the scheme is not jointly liable for the charge, which means any subsequent interest or penalties stay with you.

Paying HMRC directly

If you decide not to use Scheme Pays, the alternative is to pay HMRC directly. The HMRC service generates an assessment that tells you the amount and how to pay (usually by bank transfer, with the reference quoted on the assessment). For most members the choice between the two routes is shaped by cash flow: Scheme Pays smooths the cost across your future pension benefits; paying HMRC directly settles it now and leaves your pension benefits intact.

Where a refund is due rather than a charge, the same two-route logic applies in reverse. If your scheme paid the original charge through Scheme Pays, the scheme refunds you (typically by increasing your pension benefits). If you paid HMRC directly through Self Assessment, HMRC refunds you to the bank details you provide on the service.

The deadlines that matter (and the ones that already passed)

The McCloud framework has more deadlines than is comfortable, and they are not in one list anywhere obvious. The headline ones are below. The figures apply if you have a charge to report; the refund-only deadlines, where you do not owe any new tax, are different and longer.

• Reporting a new or changed Annual Allowance charge. 31 January 2025 for active and deferred members on 1 October 2023; 31 January 2027 for pensioners (or LPRs of deceased members) on that date. The 31 January 2025 deadline has now passed; if you are in that cohort and your RPSS has only just arrived, see the section below on late-issued statements.
• Electing mandatory Scheme Pays. 6 July 2025 for active and deferred members on 1 October 2023; 6 July 2027 for pensioners on that date. The 2025 date has now passed; voluntary Scheme Pays is still available without the joint-liability protection.
• Refund-only filings (overpaid tax originally paid by the member). 31 January 2029 for active and deferred members on 1 October 2023; 31 January 2031 for pensioners. These are the windows for filing where the only outcome is a refund to you.
• Corrected RPSS. If your scheme issues a corrected RPSS after you have filed, you have three months from the date you receive the corrected version to update your submission through the HMRC service.
• Late-issued RPSS. Where a scheme issues an RPSS after the statutory deadline (which has happened to many members because of cross-scheme delays), HMRC has indicated that members should file as soon as the statement arrives. Provisional figures are accepted on a Self Assessment return where they were used in good faith pending the RPSS. The “reasonable excuse” framework applies in the way it applies to any other late-arriving information from a third party.

The trap most easily fallen into is treating the original tax year (say 2017/18) as the deadline anchor. It is not. Every McCloud-related filing date is set against the remedy framework, not the original tax year. A 2017/18 Annual Allowance charge that needs adjusting is reopened by the McCloud rules, not by the standard Self Assessment four-year window.

How the rollback changes Annual Allowance

The mechanic is, despite its reputation, mechanical. The HMRC service does the maths. The underlying logic is worth a paragraph because it explains what your RPSS is doing and why.

• The service takes the original pension input amount for the year (what your scheme reported at the time, used on your original Pension Savings Statement).
• It replaces it with the rolled-back pension input amount (what your scheme now reports, on your RPSS, on the basis that you had been kept in the legacy scheme).
• It applies the year’s Annual Allowance and any taper that applied at the time, recomputing the charge.
• It compares the new charge against the original. The difference is what is owed to you or by you.

For most members the legacy pension input amount comes out lower than the reformed one, because legacy final-salary schemes credit pension growth on a different basis than the reformed CARE schemes. The typical outcome, then, is a reduced AA charge and a refund. For consultants, senior teachers, senior officers, and others who breached the AA in the remedy years, the refunds can be substantial; four-figure totals across the seven-year window are common, larger amounts not unusual. The numbers are member-specific. The structure is the same in every case.

Where the rollback raises a pension input amount, the same calculation runs in the other direction. The most common cause is unusual: a member who entered the reformed scheme on terms that produced lower input amounts than the legacy treatment would have. The HMRC service flags any new charge plainly.

How the rollback changes lump-sum tax tests

Until 5 April 2024 the Lifetime Allowance set a ceiling on the total pension benefits that could be tested without an LTA charge. Each benefit crystallisation event in the remedy window used a percentage of your LTA, calculated against the pension benefits taken at the time.

The rollback can change those percentages. If your remedy-period benefits are revalued under legacy rules, the value of the benefit you took at the time is sometimes different from what was tested originally. The McCloud framework recomputes the percentage and, where a charge was paid, recomputes the charge. Refund routes are the same as for Annual Allowance: HMRC refunds you directly if you paid the charge yourself; the scheme refunds you (usually by increasing your pension benefits) if the scheme paid.

From 6 April 2024 the LTA was replaced by two separate allowances. The Lump Sum Allowance is £268,275; the Lump Sum and Death Benefit Allowance is £1,073,100. Both are new since the abolition and unchanged for 2026/27. McCloud-driven changes to historic LTA tests still flow through under transitional rules, so a pre-April-2024 lump sum tested against the LTA can still be reopened by the framework even though the LTA no longer exists.

Higher LSA figures apply to members who hold valid pre-April-2024 LTA protections (Fixed Protection, Individual Protection, Enhanced Protection, primary protection). If you hold one of those protections, a McCloud adjustment can in principle interact with it; this is one of the situations where regulated tax advice is usually warranted.

How the numbers settle: refund routes

Once your submission is in and HMRC has reviewed it, four things happen depending on which side the change comes out and who paid the original charge.

• Refund of a charge you paid HMRC directly (2019/20 to 2022/23). HMRC refunds you to the bank details on the service. Repayment interest is added based on the tax year the charge related to.
• Refund of a charge your scheme paid through Scheme Pays (2019/20 to 2022/23). HMRC passes the details to the scheme. The scheme increases your pension benefits to cover the overpaid charge it carries on its records.
• Refund of a charge from 2015/16 to 2018/19. HMRC passes the details to the scheme regardless of who originally paid. The scheme then either pays you compensation directly or increases your pension benefits to reflect the overpaid charge. Either route eventually settles; the scheme’s choice between cash compensation and benefit uplift is rules-based, not discretionary.
• New or extra charge. HMRC issues an assessment for the amount, with payment instructions. If you elected Scheme Pays within the deadline, the scheme picks the charge up directly and reduces your future pension benefits accordingly.

Repayment interest is significant for the older years, because it has been compounding for the best part of a decade. HMRC’s interest calculation runs from the original tax year, not from the date of your McCloud submission, so members owed refunds for 2015/16 charges should expect the interest element to be a meaningful fraction of the headline.

Where this gets complicated

The straightforward case is a member who paid one Annual Allowance charge in one tax year, has a clean RPSS, and uses the HMRC service to file once. Many members are not in the straightforward case.

• Pension sharing on divorce. If you took a pension credit (or had a pension debit) during the remedy window, the rollback interacts with the original sharing order. The scheme administrator handles the mechanical adjustment; the tax position can be unpicked but the route is slow and document-heavy.
• Ill-health awards. A member who took an ill-health pension during the remedy window is in an Immediate Choice cohort and will usually have an RPSS that reflects the ill-health uplift. The tax framework still runs in the same way; the complication is more administrative than rules-based.
• Transfers in or out. A transfer out of a public-service scheme during the remedy period (whether to another public-service scheme, or to a private scheme through the Public Sector Transfer Club) can carry its own LTA test. McCloud adjustments can flow through, but the calculation is rarely as clean as a single-scheme case.
• Partial retirement. Members who took partial benefits during the remedy window will have one or more historic crystallisation events; each is reviewable under the framework.
• Multiple public-service schemes. Members who moved between, say, NHS and Civil Service during the remedy window need an RPSS from each scheme. The HMRC service combines them; missing one will make the calculation incomplete.
• Death benefits. If a member died during or after the remedy window, the legal personal representative handles the adjustment. The deadlines for the LPR are aligned to whether the deceased was a pensioner on 1 October 2023 (later deadlines) or active or deferred (earlier deadlines).

The HMRC service handles the underlying maths in every one of these cases; the complexity is in gathering the documents and getting the right RPSS issued first. Where members have multiple schemes or a divorce-era pension share, this is the situation in which a regulated pension tax adviser most clearly earns their fee.

Common mistakes and red flags

The recurring problems in the tax side of the remedy fall into a small number of patterns. Each of them is worth a careful look on your own paperwork.

• Filing through Self Assessment instead of the McCloud service. A standard amended return for a remedy year is rejected. All McCloud-driven changes go through the dedicated service.
• Using the original PSS figures instead of the RPSS figures. Some early submissions were made on the figures from the original Pension Savings Statement, before the RPSS was issued. The HMRC service flags the mismatch but does not always reject it; the resulting calculation is wrong.
• Treating the RSS as a tax document. The RSS contains some tax-relevant information (a tax annex showing revised pension input amounts in many schemes) but it is not the formal RPSS. Filing on the RSS alone is risky; check the cover letter to confirm which document is which.
• Missing one scheme in a multi-scheme case. If you were in the NHS scheme and the Teachers’ scheme during the remedy window, both schemes owe you an RPSS. Filing without one is incomplete.
• Forgetting the tapered Annual Allowance. Members who were in the taper sometimes recompute the standard allowance and stop there. The taper recomputation runs separately and can move both directions; the service handles it if you provide the income figures.
• Assuming the year is closed. Several members have written off their remedy-year tax position on the basis that the four-year Self Assessment window had shut. The McCloud framework reopens those years specifically; do not assume the door is closed.
• Missing the corrected-RPSS three-month rule. If a corrected statement arrives after you have filed, the three-month update window applies. Letting it lapse can leave the wrong figures in your final settlement.

If your RPSS has not arrived yet

For many active and deferred members, particularly in the NHS and Civil Service schemes, the RPSS has not yet been issued. That is not your problem to solve; it is the scheme’s problem. But it is worth knowing what to do when the document does arrive.

HMRC’s published guidance recognises the delivery delays. The “reasonable excuse” framework that applies to any other piece of late-arriving third-party information also applies here. In practice that means: file as soon as the RPSS arrives, in good faith; if a deadline has technically passed, the late filing is unlikely to draw a penalty if the scheme’s late issue is the reason. Keep written evidence of when the RPSS was received; the date on the cover letter is usually enough.

If you filed a Self Assessment return for any of the remedy years using a provisional figure, mark it provisional and use the HMRC service to update the figures once the RPSS lands. HMRC has been clear that provisional figures used in good faith do not attract late-filing penalties.

While you wait, two practical things help. Keep your historic Pension Savings Statements (the originals from the relevant tax years) to hand. Keep any historic Annual Allowance charges paid through Self Assessment; HMRC’s records will have them but you will need to confirm the figures against your own evidence. If you used Scheme Pays, your scheme will have those records but it sometimes takes longer than expected to retrieve historic ones.

Common questions

Pension Plain’s take

The McCloud tax framework is more usable than its reputation suggests. The HMRC service is genuinely well built; the deadlines are statutory but not arbitrary; the dual-document logic (RSS for benefits, RPSS for tax) is sensible once the difference is understood. The hard parts are administrative, not technical. The most common reason members miss out on a refund is not that they cannot work the service; it is that they assumed the year was closed, or that their scheme would handle it automatically, or that the RSS was the only document.

For active members still waiting on a delayed RPSS, the wait is annoying. It is not a deadline crisis; HMRC’s framework was built knowing schemes would run late. File when the document arrives; keep the cover letter; if the figures look wrong, push back through the scheme’s complaints process before filing. Refunds compound interest in your favour while you wait. Charges, if any, are usually capable of being settled through Scheme Pays once the joint-liability protections of the mandatory window have lapsed; the price is a slightly higher actuarial conversion than members in the original window had.

The reason this section trips so many readers is that the rules are unfamiliar by design. Most public-sector members never engage with Self Assessment for their pension, because Scheme Pays handled it at the time. The McCloud rollback drags some of those members back into the tax conversation, often years later, with an unfamiliar service and unfamiliar paperwork. The framework is workable. The rules pay for the time spent reading them.