Tax on small pension pot

tgon

My wife is taking a small pension pot on her 60th birthday in a few weeks time. Part of this will, of course, be taxed. As she earns no taxable income how can she best reclaim the tax applied?

Thanks in advance.

Your_Hero

Complete a self-assessment. Phone HMRC to register.

jamesd

HMRC has a form for this. Just follow the instructions there. Don't be confused by the mention of a P45, that's because pension payments are done through PAYE systems so it looks a bit like a job but without NI deduction. The lump sum is effectively a one day job. There's no need to become part of the self-assessment system for this and no need to wait until the end of the tax year, just give an estimated income that includes this and any expected interest and let HMRC know which bits are estimated, then let them know the difference once the year is over.

Your Hero, there's some background on this on HMRC's Pension Schemes Newsletter 53 if you're curious.

McKneff

Ring HMRC, if she has no other income, they could well send her pension company her new tax code and so they wont deduct any tax.

kidmugsy

jamesd wrote: »

HMRC has a form for this. . There's no need to become part of the self-assessment system for this and no need to wait until the end of the tax year, just give an estimated income that includes this and any expected interest and let HMRC know which bits are estimated, then let them know the difference once the year is over.

And cultivate the virtue of patience: in our experience they are none too quick at dealing with this.

jamesd

Thanks, no surprise there. Still beats joining the SA system or waiting until the end of the tax year even if not in SA!

tgon

The Pension Protection Fund were in mixed minds whether they issue a P45 but now say they'll "sort it out" with the tax office directly and no P45 will be issued. So thats a 9 week delay so far...

Her other, even smaller tax claim on a trivial sum (contracted out SERPS) has been with the taxman for a month, with a P45. How long is the virtue of patience?

kidmugsy

tgon wrote: »

Her other, even smaller tax claim on a trivial sum (contracted out SERPS) has been with the taxman for a month, with a P45. How long is the virtue of patience?

Two or three months should see it done.