pension lump sum payment

turbonet

Hello everyone


I am 55 years old ,and been a house husband now for about 8 years
no income what so ever has been earned by me


I had an old company pension pot which I cashed out on the 16th October 2018
the pot was only £19000 ,I got £14000
the rest I had to pay in tax apparently


have been told that I will receive a P45 to claim my tax back


am I going to be able to claim this tax back ( or some of it )


as I have not worked for 8 years


over these 8 years I have sold my house ,and had a successful PPi claim refund


but no paid employment


if I put in the claim for a tax refund


will they say I owe them ?






Roger

comeandgo

You won't get it all back. You get 25%, of £19,000, £4;750 tax free due to pension tax rules. The rest £14,250 is regarded as taxable income. This is more than your yearly free tax amount, which is about £12,000 so you do have to pay tax at 20% on £2,250 which is 450.00. I'm assuming you have not given your married tax allowance to your wife.
So you won't get the full £6,000 back but £5,550.

Dazed_and_confused

£5,550 is overstating things quite a bit I think.

On a pot of £19,000 the op would only have actually had £4,767.45 tax deducted from the taxable element (£14,250).

Assuming no Marriage allowance application has been made then the op would have tax to pay of £480 in the current year.

Already paid £4,767.45 so £4,287 would be repayable.

If they have applied for marriage allowance then the refund will be £238 less.

The PPI refund may change all of this depending on which tax year it was paid and the amount of interest received. Chances are though the PPI interest will be taxable at 0% so there could be an additional refund of any tax deducted from the PPI interest.

Dazed_and_confused

if I put in the claim for a tax refund will they say I owe them ?

This does make me wonder though, either the op is paranoid or there's something they're not telling us about their income!

turbonet

No .not paranoid at all
from past experience ,I know how the tax people work


I told you everything about my situation

AnotherJoe

Are you putting £2880 into a pension every year to get your free £720 ?

turbonet

No I am not

AlanP_2

turbonet wrote: »

No I am not

If you have the cash then start doing so, one of the few "free money" deals around.

Linton

Have a look at:
https://www.gov.uk/government/publications/flexibly-accessed-pension-payment-repayment-claim-p55


The high tax you were charged arises from the way PAYE operates**. It leads to excess tax on lump sum payments. It didnt used to happen that often but it is more of a problem since the introduction of large pension drawdowns.


** Full explanation available on request.