Tax due on a Small Pension Commutation payment

MikeFloutier

Hi,

I just turned 60 and have started drawing my FS pension having taken a tax free lump sum (approx 12.5% of the scheme funds).

The only other pension scheme I have (apart from State) is £1000 that I put in an HL Vantage SIPP (as cash). I was planning to add to this but never did.

I have now got this repaid to me but I see that tax (at 20%) has been deducted from 75% of the repayment.

My question is: "Since I have not taken the maximum 25% of all my schemes as tax free lump sums, can I now reclaim the tax on this 75% of this Small/Trivial Pension"?

HL suggest I MAY be able to and that I should use a form P53.

xylophone

I just turned 60 and have started drawing my FS pension

:beer:
It all worked out as expected in the end?


http://www.hmrc.gov.uk/pensionschemes/small-pen.htm#3



"How your lump sum is taxed
If a lump sum is paid instead of a small pension before you started to get that pension, only 75 per cent of the lump sum is taxable. If you were already getting the small pension but have turned it into a one-off lump sum instead, the whole lump sum is taxable.
Your scheme administrator will deduct any tax due at the basic rate of 20 per cent using Pay As You Earn (PAYE) and should give you a P45 showing how much tax has been paid.
The amount of tax you pay depends on your total income for the tax year. Even if you normally pay basic rate tax at 20 per cent, you may still end up paying too much tax on your lump sum. If this applies to you, or if you normally don’t pay tax at all, you can claim back the overpaid tax from HM Revenue & Customs (HMRC). If you're a higher or additional rate taxpayer you may need to pay more tax through self assessment, as the tax on your lump sum will only have been deducted at 20 per cent
If the lump sum payment doesn't meet the conditions described above it will be an unauthorised payment and you may have to pay extra tax."

The above seems to be relevant? I don't think I've seen any legislation that allows you to take variable lump sums from different pension providers provided that the whole adds up to 25%?

Have you asked HMRC?

molerat

Do you pay tax on your pension ? If you do at 20% then the deduction is correct, if 40% then you owe more. Each individual pension has the 25% allowance.

MikeFloutier

Thanks Guys, yes I'm a 20% tax-payer so it looks like I am liable for this tax.

I guess my reasoning was: since I have a 25% TFLS allowance (and could have taken an additional £30k tax free from my Barclays pension) then surely it's not unreasonable to use up a small part of that 25% now when cashing in my SIPP.

Perhaps I will ask HMRC; will let you know.

Thanks again - and yes Xylophone it all went well, thanks to you guys :beer: