Tax Query on Pension Drawdown

Tabitha_T

Hi, I took a £23,000 pension drawdown in May 2015, understanding that 25% would be tax free (£5750), leaving a taxable amount of £17,250. I don't have any other income, so, I thought that after taking off my Personal Allowance of £10,500, I would have to pay tax on £6750 x 20% = £1,350. Therefore, I was hoping to receive somewhere in the region of £21,650.

When I received my pay advice the pension provider had taxed me on an emergency code and said I would have to claim the tax back. I received a net payment of £17,200.

I recently applied for a tax refund via form P53 but I have now received a letter saying that my tax is correct for previous 4 tax years, although they don't include 2015/16 in that. The letter goes on to say that the sender doesn't have to provide me with his calculations (Seriously? How rude!) and my tax is all correct and nothing is owed to me.


Surely this isn't correct? The drawdown relates to 2015/16 which he hasn't even mentioned! I can't get through on the phone at the moment, but for when I can, is it possible that someone can tell me if my calculation is correct and I am in fact owed money?

I appreciate that we're working on 2014/15 tax year at the moment, but my pension provider said I could apply at any time for a refund if emergency tax code had been applied.

Many thanks, Tabs

Paul_Herring

The tax calculation was probably (is usually) based on assuming that you'd be withdrawing £17,250 per month (the "emergency tax code" bit.)

Using the defaults except no NI, LIstenToTaxman suggests that you'd get £10,642.25 from the 75%, making a total of £16,392.25, so ballpark. Ish.

Since you aren't actually withdrawing £17K per month, you will indeed be due a tax rebate.

There are three different forms. Which should I fill in?
If you took your whole pension pot at once and you have no other income then you need to fill in a form called a P50Z.
If you took your whole pension pot at once and you have other taxable income, you need to fill in a form called a P53Z.
If you took a chunk of your pension pot (but not the whole thing) and you're not taking another flexible payment before April 6, 2016, you need to fill in a form called a P55.

(The Z suffix is for the non-small-pension forms.)

It's unclear why they've not referred to the current tax year however (the previous link mentions .

xylophone

http://www.thisismoney.co.uk/money/pensions/article-2966766/Savers-using-pension-freedom-warned-pay-emergency-tax.html

(Emergency code for 2015/16 is 1060L). The Personal Allowance for this year is £10,600.

See http://www.pruadviser.co.uk/content/knowledge/technical-centre/taxation_on_pension_income/




You say that your only income for the year 2015-16 will be the taxable portion of your pension. This was the whole pension pot?

However, you also say that you submitted form 53Z have you submitted the wrong form? It would appear that Form 50Z would have been correct?

https://www.gov.uk/claim-tax-refund/you-get-a-pension

.

TadleyBaggie

For some reason the OP created a new thread here instead of replying to this thread. It seems it has now been sorted out.