Age Related Personal Allowance trap.

Jimbo001

First the good news:
I retired from my company pension scheme some 15 years ago and have just been informed that over that period I have been underpaid by about £20,000.
Apparently the legal requirements for normal pension ages to be equal for male and female members had not been correctly applied.



Now the bad news:
This this takes me into the income bracket for this tax year that will mean that the age related personal allowance is progressively clawed back. In other words I will have an effective tax of 30% on a significant part of the windfall.
Had I been paid my correct pension for the last 15 years the tax paid would be much less. My company pension would have been partly tax free and partly taxed at the standard rates applying at the time.
Can anyone offer any advice about the possibility of reducing the tax burden for the current tax year?

Jennifer_Jane

I wonder if there are any possibilities around putting the money in a SIPP or something to reduce your income back down to the appropriate level.

patanne

This would be a much smaller problem if you could persuade them to pay in April & not March as there is much less to claw back on next years tax codes. They may be amenable as it is after all their mistake

jimmo

http://www.hmrc.gov.uk/manuals/eimanual/EIM74103.htm

Jimbo001

jimmo wrote: »

http://www.hmrc.gov.uk/manuals/eimanual/EIM74103.htm

Thanks this appears to be answer my query!