Reclaiming tax on redundancy payment & aligning drawdown amount with personal allowance.

hyperhypo

I had recently negotiated a settlement agreement with my erstwhile employer.  I had requested that £30k paid directly into my company pension , and paid tax on the balance (which included the nontaxable £30k part, plus all the deductible bits for notice, holiday's etc. The money was paid in their April payroll run int the new tax year. My tax code of 1250L.

Of a sum of roughly £48k i have paid c. £6k in income tax.

Do i have to wait until end of this tax year to claim this back ? As am unlikely to receive paid employment in this tax year although am claiming contribution based JSA , which ends in October 2020, which i expected comes into tax calculation. 

Also, i am wanting to try and calculate how much of my current year personal  allowance would be available to drawdown from pension , i.e to make full use of my current year's allowance, but the situation with the amount of tax paid so far on the  redundancy amount makes it difficult to work out.

HMRC appear to have assumed i'm going to be earning the same amount this year as i did in the last current year, which i'm guessing is why they have taken £6464.80 tax from a gross amount of 18,186.60.

When and how might i try and straighten this out ?

blue.peter

Generally speaking, overpaid income tax from one employment will get straightened out either (a) through PAYE on any subsequent employment in the same tax year or (b) when HMRC reviews your records some time in the following tax year.

You've said that you are "unlikely to receive paid employment in this tax year" (my emphasis). Just how unlikely is it? Are you seeking employment, and just think that you probably won't get any before 6.4.2021? If this is the case, I don't think that you can make a claim in the present tax year. As I recall it, I was only able to reclaim overpaid tax in November 2015 because I had no intention of receiving any further taxable income before 6.4.2016. (I was, in effect, retired, but not drawing my pension until February 2017.) And it was November 2016 because I had to wait a month after receiving my final salary payment in October.

See https://www.gov.uk/claim-tax-refund if you want to give it a try. I think you'll find that the system will stop your claim unless you can categorically say that you'll have no further income in 2020-2021.

PAYE is calculated on the basis of spreading your personal allowance equally across each month of the tax year. I would expect that the calculation of tax that you've already paid is on the basis of 1/12 of the personal allowance (£12,500 for the present tax year, if I remember rightly).

Mickey666

Call the tax office and discuss it with them.  That's what I've done when drawing down an amount equal to my personal allowance from the taxed portion of my pension.  The pension company deducted tax using an emergency tax code (I think - some sort of tax code anyway, even though I hadn't worked for years) and I didn't want to wait until the end of the tax year.  I called the tax office, told them I wouldn't have any further taxable income that year and they arranged to refund the deducted tax immediate.  The cheque arrived within a couple of weeks.

Really, with this sort of question it's better to call the tax office directly rather than post on here.  Whatever answers you get here, you'll still have to contact the tax office anyway, so you might just as well cut out the middleman and save some time.

Dazed_and_C0nfused

Also, i am wanting to try and calculate how much of my current year personal  allowance would be available to drawdown from pension , i.e to make full use of my current year's allowance, but the situation with the amount of tax paid so far on the  redundancy amount makes it difficult to work out.

That's an easy one.  Zero.

If you have already received £18k in taxable income in 2020:21 then you have no Personal Allowance left available.

If you have no further income then you would eventually get £5.3k* of the tax deducted back.

If you handed your P45 to the DWP when you claimed Jobseeker's Allowance then DWP will normally make a tax refund when you stop claiming or the tax year ends, whichever comes first.

If you get a refund from DWP part way through the tax year then HMRC will automatically make any additional refund due after the end of the tax year.

* may differ if you are Scottish resident for tax purposes.

hyperhypo

Thanks All....Dazed &...yes of course i can't count ! I haven't received any P45 yet, neither did JSA ask for it at the time. Goodness knows what i was thinking as i knew that the deductible element was c. £18k !