Income put into wrong tax year

sheramber

Because of the way the weekend fell it was paid into her account on the Monday, which was the 6th April.
That would make the 3 rd a Friday so no reason for payment not to be made then.
It looks like payment was scheduled for 6 th which put  payment into the next tax year.

jimmo

The description given by Civil Service Pensions suggests that the lump sum payment is actually arrears of your mother's entitlement to a Widow's Pension from the date of your father's death.

If that is the case there are differences between the rules for PAYE and Tax liability.

Under the rules for PAYE the payer has to operate PAYE on the date of payment so if the payment was made on 6 April CSP are correct.

Under Income Tax rules liability on pension income is assessed on an accruals basis.

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim74103

 

That link above explains what your mother needs to do but, unfortunately this means that whilst the correct amount assessable for 2019/20 can be determined now the tax overpaid foe 2020/21 cannot be determined until after 5 April 2021 and your mother will have to wait until then to be repaid.

DairyQueen

RikkiMcN said:

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, 

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

I think OP means 3rd April 2020 and that this was a typo as dad didn't die until 26th Dec 2019.

It's very likely that mum's income would have increased on dad's death. Old SP rules would apply to this couple so mum (at age 88) would likely have her SP increased to, possibly, 100% of her late husband's SP.  Also, since dad's death, mum would likely be entitled to civil service widow's pension. Result being that mum's income would substantially increase on dad's death. As this occurred toward the back of tax year 19/20 mum's income this tax year (20/21) will be substantially higher than last. 

Seems unfair if mum should lose the chance to offset last year's unused personal allowance against this lump sum payment. 

sheramber

DairyQueen said:

RikkiMcN said:

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, 

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

I think OP means 3rd April 2020 and that this was a typo as dad didn't die until 26th Dec 2019.

It's very likely that mum's income would have increased on dad's death. Old SP rules would apply to this couple so mum (at age 88) would likely have her SP increased to, possibly, 100% of her late husband's SP.  Also, since dad's death, mum would likely be entitled to civil service widow's pension. Result being that mum's income would substantially increase on dad's death. As this occurred toward the back of tax year 19/20 mum's income this tax year (20/21) will be substantially higher than last. 

Seems unfair if mum should lose the chance to offset last year's unused personal allowance against this lump sum payment. 

Jimmo has explained the position  and what action needs to be taken.

Jen50

Dairy Queen, you are completely correct, before my dad died my mums income was £250 per month. Now she is entitled to part of my dad’s civil service pension ( not all ) , and an increased state pension, because she was given a lump sum which they paid into this current year, it has put her over the tax threshold for this year, if it had been paid into last year, then she wouldn’t have been over the tax limit for last year or this year.

 Thank you everyone for all your help.