Tax on pension

leasehorror

I think I have made a mistake when I cashed in one of my pensions.
I had 3 pensions, 1 defined benefit pension worth about 180k and 2 defined contribution pensions. I cashed in both of the defined contribution pensions, One was under 10k (small lump sum) and I paid no tax and the other was over 10k (uncystalised) and I paid tax.
My worry started when I read that to be able to take a small lump sum pension tax free, all pensions had to be worth less than 30k combined. My defined benefit pension far exceeds this and I don't know how to go about correcting this. Can anyone help me, should I contact the tax office?

HappyHarry

leasehorror wrote: »

I think I have made a mistake when I cashed in one of my pensions.
I had 3 pensions, 1 defined benefit pension worth about 180k and 2 defined contribution pensions. I cashed in both of the defined contribution pensions, One was under 10k (small lump sum) and I paid no tax and the other was over 10k (uncystalised) and I paid tax.
My worry started when I read that to be able to take a small lump sum pension tax free, all pensions had to be worth less than 30k combined. My defined benefit pension far exceeds this and I don't know how to go about correcting this. Can anyone help me, should I contact the tax office?

There is no need, you haven’t fallen foul of any tax rules.

The small pots rules changed a while back (April 2015), and now only affect the timing of the Money Purchase Annual Allowance (MPAA) rules. You can now crystallise as many pots as you want, whenever you want. The only rule is that you can surrender up to three pots, each of £10,000 or less (within 12 months of each other) without having the MPAA imposed.

As you have crystallised one pot in excess of £10,000, then you will have the MPAA imposed, i.e. a reduced annual allowance of £4,000.

75% of each pot that you cashed in was taxable. It is possible that when you cashed in the first pot, the taxable amount did not exceed your personal allowance, and therefore you paid no tax on it.

leasehorror

That's what I was worried about, I ticked the box for small lump sum thinking that the pension only needed to be under 10k not realising the 30k limit for all pensions. I was working full time and so would have exceeded my personal allowance. If 75% of each pot was taxable do you have any idea how I can rectify this? Should I contact HMCE or the pension company?

HappyHarry

Let HMRC know.

leasehorror

Hi Harry, I did pay tax, phew! Thank you for your help.