Aaargh - HMRC included my Tax lump Sum in previous year - help please

0779mike

I deferred taking my state pension for approx 2.5 years.  I purposely waited until after 6 April 2021 and then requested the maximum back payment (12 months) as a lump sum and to start receiving the (enhanced) monthly payments.  The lump sum arrived in my bank account in July 2021 and monthly payments thereafter.

HMRC have just sent me my "Simple Assesment Tax Calculation" for 2020/2021 and it includes State Pension income of £9204.  I did not receive any State Pension payment (lump sum or monthly) until July 2021.

In my opinion it should be counted as income for the 2021/2022 tax year.  Oh dear, including it in 2020/2021 puts me on 40% tax for that year and increases my tax bill considerably.

Is HMRC correct in doing this  ?  Any advice please ?      

Dazed_and_C0nfused

Do you mean deferred (very specific in State Pension terms) or you made a late claim?

Deferral with a lump sum isn't possible if SPA is after 5 April 2016. 

0779mike

I am not sure of the official terminology.... 

I became eligible for SP in Sept 2018 (aged 65) but as I was still in paid employment I didn't elect to start drawing it until well after 6 April 2021.  At that point I asked for the biggest lump sum possible (12 mths) and commencement of (enhanced) monthly payments.

Pennywise

State pension is taxable on the accruals basis rather than the cash basis, so any "arrears" that related to the earlier tax year is taxable in that tax year, not the year of receipt.

0779mike

Oh no, that is robbery.

I think I understand.  In which case HMRC should not refer to it as a "lump sum", they should always call it arrears or better still, back payment.

Jeremy535897

See:
https://www.litrg.org.uk/tax-guides/pensioners/what-tax-do-i-pay-my-state-pension-lump-sum

which explains the point (including the fact that you can no longer receive a lump sum for deferring your state pension)