Income put into wrong tax year

Jen50

My dad died on Boxing Day 2019. My Mum received a small lump sum from his civil service pension dated 3/4/19. Instead of putting into last year’s tax year they have put it into this year’s, causing my 88 year old mum to pay tax on it, which she wouldn’t of if it was in last year. I have contacted both the tax office and civil service pensions, but I’m getting nowhere, any advice most welcome. Thank you.

DairyQueen

Could you confirm that the payment was issued on 3rd April 2020. What date did she receive it? and in what form (cheque? bank transfer?). is this the Local Government Pension Scheme (LGPS)? If so, you may receive a comprehensive answer if posted on the Pensions board. @Silvertabby hangs-out there and she is an expert on that scheme.

I am no expert but believe that pension payments (including lump sums) are often processed like a PAYE payroll - i.e. in a batch toward the back end of each calendar month. This means that payments due for the whole of the month of April may move into the next tax year. For example, if you left an employer on the 3rd April, and didn't work again for that month, you may not receive the salary due 1st-3rd until the back end of April and it would count as income in the next tax year.

Pensions moving into payment also suffer this anomaly. It often takes more than a month to initiate the first payment and then the first (backdated) and second payments are made within days of each other. If the first payment was due (say) 3rd April it may not be paid until 1st May and would count as income in the following tax year.

Jen50

Thank you for your reply, she has a pay slip saying for payment from26/12/2019- 31/3/2020, payment to be paid on 3/4/2020, it’s a civil service pension not local government.

Jen50

Because of the way the weekend fell it was paid into her account on the Monday, which was the 6th April.

DairyQueen

Was the payment made net of tax? If so, looks to me like, absent a tax code for her, they did what every pension payer does in those circumstances and applied an emergency tax code (20% automatically deducted). The pay period clinches it for me as that applies to tax year 2019/2020. If mum had insufficient income, including this payment, to exceed her tax allowances then she can claim a tax refund now. See here for how to do so.

HMRC are pretty quick at repaying. Should be within two months.

chrisbur

Is there a week or month number on the payslip.  52 or 12 would indicate 19/20 tax year 1 would be 20/21 tax year.

Jen50

Thank you for your reply, no there is nothing on there to say that, it was a one off payment to tide my mum over after my dads death.

Dazed_and_C0nfused

How do you know this?

Instead of putting into last year’s tax year they have put it into this year’s, causing my 88 year old mum to pay tax on it,

And who is "they"?

Jen50

Thank you so much to everyone who is trying to point me in the right direction, my Mum only had a reduced state pension before this payment and was well under the tax threshold. I have contacted hmrc who will not give a refund and have asked me to contact civil service pension provider to ask them to reissue the document for the year before, yet they are saying they can’t do this.

Dazed_and_C0nfused

Why won't HMRC issue a refund?

How do you actually know this?

Instead of putting into last year’s tax year they have put it into this year’s, causing my 88 year old mum to pay tax on it,

RikkiMcN

Jen50 said:

My dad died on Boxing Day 2019. My Mum received a small lump sum from his civil service pension dated 3/4/19. Instead of putting into last year’s tax year they have put it into this year’s, causing my 88 year old mum to pay tax on it, which she wouldn’t of if it was in last year. I have contacted both the tax office and civil service pensions, but I’m getting nowhere, any advice most welcome. Thank you.

Without understanding all the variables it’s hard to pinpoint exactly what the right outcome is here. 

If your mum is 88, I would imagine her own income hasn’t suddenly increased over the two tax years? If this is the case, why do you feel that she would not have been taxed last year, but was wrongly taxed this year?

Although dated 03/04/19, this is when the civil service sent the payment. As you say, this tax year crossed the weekend, therefore it would have been the bank who did not complete the transfer immediately (due to processing times and weekend).

I would not imagine there would have been any reason why payment would have to be guaranteed to fall in the previous tax year, due to the nature of the payment being a result of a bereavement I.e could happen at any time of the year. 

I would be interested to find out why the sudden change in tax position though as this may help.