Finances after Dad Passed Away

HoldenC

Hi

Posting on behalf of my mum

My Dad (85) sadly passed away in August 2018 and I immediately set about sorting his affairs so that my Mum (86) wouldn't have the hassle of doing it. I managed to get everything in order and done within days, some stuff like probate took weeks to finalise but that is done now.

Dad had an work pension paying monthly to him, which has now transferred to mum, he also had a Navy pension; mum had the choice of monthly payments (RN Pension) or a lump sum, she took the lump sum. So mum now has her old age state pension and my dads work pension, however the work pension "pay slip" shows tax code D0, so is taking 40% off the pension payment in tax. The 2 pensions she has don't total £46,351 so i don't understand why she would be paying the higher rate.

Any advice / insight would be very much appreciated

Many thanks

tacpot12

It could be because the Navy pension lump sum payment was made it was taxed and they had to use an emergency tax code. When this happens, it is assumed that the payment will be made every month at the same level: so if the payment was 5000 pounds, HMRC will assume that your mother will be receiving 60,000 pounds in the tax year, so that she is due to pay 40% on any further income.

Do you know if the Navy pension lumo sum was taxed?

I don't know enough about military pensions or the circumstances under which your mum accepted the lump sum so I can't say whether she should have been taxed or not, but it is turns out that the above is the explanation then I think your Mum might be able to call HMRC to ask for a new tax code to be sent to your Dad's works provider, but I don't know if this is actually allowed. You might have to try this and I would be interested in hearing whether this works.

Your Mum can also reclaim any tax that she overpaid on the payment from the Navy using form P53 (which can also be completed online via the Government Gateway), but she might not know until the end of the tax year whether she overpaid any tax (if she paid any tax at 40% on the lump sum, then she might well have overpaid). You could try completing the P53 before the end of the year, using the information you have about what income she will receive from your Dad's Works scheme and see if this results in a repayment before her actual income for the tax year is known. Again, it would be great to hear how you get on.

Hopefully you will get a reply that is more certain about what the cause is and what you can do.