Small Pot and Flexi Tax Refund

drumtochty

We have just taken payments from two pensions for the good lady.


She earned a total of say £1,630 in April and May both in this tax year via PAYE employment but we do not expect her to earn any more money from her job. Therefore she paid no imcome tax as the earnings were within her personal allowance in those months.



She cashed in a Section 32 Buy Out pension plan where the total pot was £1,450 and the taxable element was £180 and she was taxed at basis rate on the full £180. This was in Septemper 2018. That is now showing on her personal tax account with HMRC. There is no money left in that pension and it is now closed. It was not a final salary pension scheme.



My reading of the HMRC advice is that this tax rebate would be claimed on form P53Z .


She also started taking flexible draw down on a SIPP again in September. We do not have the final numbers from the SIPP provider but the gross taxable withdrawal was around £9,000 and we have yet to find out the PAYE deduction.


When we get details of the deduction next week, I assume this will be taxed using emergency tax rules rather than a simple basic rate deduction used on the small pot above. There are still funds in the SIPP to be drawn in future tax years.


My reading of the HMRC advice is that tax rebate should be claimed on forum P55 for the SIPP still in drawdown.


Prior to calling HMRC on Monday to confirm that she requires to fill in these two forms can anyone advise if my reading of the HMRC advice is correct or can it be done on one of the forms.

Dazed_and_confused

I wouldn't be certain filling in two forms for the same tax year is the right way to go.

Has she actually left her job i.e. P45 issued?

I would contact HMRC and explain the situation and ask what the best way forward is.

But I would be inclined to wait until you can see the £9,000 payment on her personal tax account so they have the upto date information.

drumtochty

[FONT=&quot]Agree with your train of thought Dazed. I was going to wait until the payment of the SIPP taxed portion is on the HMRC personal tax account and we have the details of the tax deducted from the SIPP payment. It only took less than a week on the Section 32 Buy Out payment to appear on her personanl tax account after the date the money arrived in our bank account.[/FONT]

[FONT=&quot]No P45 issued from her part time job, just in case she may do some other work for that employer this tax year which we think is unlikely but we have decided to park that decision until Spring 2019 re the P45.[/FONT]

[FONT=&quot]In saying that she only has around £1,000 left of her nil rate PAYE band to go this year.[/FONT]

[FONT=&quot]I will report back with the advice that HMRC gives but I too consider putting two different tax rebate forms in to HMRC to be a source of possible confusion.[/FONT]

Dazed_and_confused

Tax on £9,000 would be £2,629.40.

If she has savings interest as well don't forget she will have the unused Personal Allowance available plus the £5,000 starter savings rate band available (taxed at 0%) and then if need be the savings nil rate band of another £1,000 taxed at 0% (slightly confusingly known as Personal Savings Allowance).

drumtochty

Sorry not to report back in a timely manner.



Once we could see both pension payments in her personal tax account, that was a small pot closed as all the funds were removed this tax year and a payment from a flexible drawdown fund that still has funds left in it after this tax years payment was made.


We filled in form P55 which on page three has two sections, one for UK pension payments, where we entered the value of the taxabile income on her closed small pot pension and the next section was populated with this tax years drawdown payment information.


The P55 form was completed online from her personal tax account and a cheque was received 15 days later. Thank you HMRC.