WPS refund tax

GibbsRule_No3

Finally heard how much MyCSP are paying me for the WPS refund. Letter mentions the tax I will need to tell HMRC about and says it will certainly be 40% and could be 55% how do I know which of the two it will be? Before deciding to take a smaller lump sum and yearly small pension instead.

Your_Hero

A refund is treated as an unauthorised payment and so the 40% tax charge will apply. I'd imagine the only time the 55% tax charge will be applicable is when it has exceeded the Lifetime Allowance (standard £1.25m).

Depending on circumstances, but purely from a tax perspective, the smaller lump sum + pension may be better.

GibbsRule_No3

Your_Hero wrote: »

Depending on circumstances, but purely from a tax perspective, the smaller lump sum + pension may be better.

I did think about that but assume the £6.43 per month would be taxed, even though the smaller lump sum would not. I reckon I'd probably need to live for at least another 14 years before I reached the full lump sum I can have now even after the 40% tax they will take.

xylophone

https://forums.moneysavingexpert.com/discussion/comment/66921922#Comment_66921922

Post 19

back_against_the_wall

My advice would be to take the lump sum in full and worry about paying the tax later. It is outrageous that these payments should be taxed in full at 40%. I was recently in the same situation. I was told by MyCSP that I had two options: (1) take a lump sum of about £9000, taxable in full at 40% or higher; (2) take a reduced lump sum of about £2500, paid tax free, and have the remainder converted to an increase in my monthly pension, which worked out at a paltry sum of less than £30 a month. My annual pension increase is about the same so I chose the lump sum. I am still awaiting payment from MyCSP. I will have to pay the tax due eventually but under self assessment rules not for at least a year, then I can pay in instalments. In the meantime I can invest the lump sum in an ISA or something and get a little bit of interest, except interest rates are so low that you just get little more than a few quid.
Best of luck.

GibbsRule_No3

I Have a question on paying the tax. I am still working so have the 1001 tax code on my payslip. I am also receiving my Civil Service pension and have a tax code for that. My HR department advise me to not let HMRC muck about with these codes as it often causes trouble later. Can I therefore ask HMRC and if so how, to pay them a one off payment for the WPS refund when I receive it?


BTW I am sure one of the replies will be "don't ask to pay, let them chase it and it will take them along time to catch up, due to the backlog" PPOV I'd rather sort it now, while fresh in the mind, probably means HMRC will love me.

xylophone

In your position (receiving pension and still employed) I would contact HMRC for advice.

https://www.gov.uk/government/organisations/hm-revenue-customs/contact/income-tax-enquiries-for-individuals-pensioners-and-employees

GibbsRule_No3

xylophone wrote: »

In your position (receiving pension and still employed) I would contact HMRC for advice.

https://www.gov.uk/government/organisations/hm-revenue-customs/contact/income-tax-enquiries-for-individuals-pensioners-and-employees

Phoned them this AM, eventually got through, longer wait than MyCSP :eek: Basically they told me to phone back in April 2015 and they would tell me what I will need to pay since I don't want them touching my tax code. As advised by my HR department. So despite my effort to pay them easily, please don't laugh :rotfl: I know this is HMRC we are dealing with. In 44 years of working I've never had to deal with them before.