Withdrawal From Pension Subject To Emergency Tax

squirrelpie

Just to add that even if you do pay too much tax initially, you don't need to claim it back. HMRC will eventually work things out so you pay the correct overall amount. It may take a year or more though, so people claim it if they need the money in a hurry.

Penshnewbie

squirrelpie said:

Just to add that even if you do pay too much tax initially, you don't need to claim it back. HMRC will eventually work things out so you pay the correct overall amount. It may take a year or more though, so people claim it if they need the money in a hurry.

Thanks. And, according to the article I referred to earlier, HMRC will refund any overpaid tax within 30 days of you making the request.

Dazed_and_C0nfused

Penshnewbie said:

squirrelpie said:

Just to add that even if you do pay too much tax initially, you don't need to claim it back. HMRC will eventually work things out so you pay the correct overall amount. It may take a year or more though, so people claim it if they need the money in a hurry.

Thanks. And, according to the article I referred to earlier, HMRC will refund any overpaid tax within 30 days of you making the request.

In theory yes but in reality it may well be longer.  There have has been a recent thread about delays with in year tax refunds 😟

DT2001

My OH is self employed but did a contract for 3 months last year on an employed basis. The 1st month they took 20% off everything and in the 2nd month, because HMRC had provided a tax code, she received a tax refund in her ‘pay packet’. I assume pensions will work in the same way through the PAYE system.

Albermarle

DT2001 said:

My OH is self employed but did a contract for 3 months last year on an employed basis. The 1st month they took 20% off everything and in the 2nd month, because HMRC had provided a tax code, she received a tax refund in her ‘pay packet’. I assume pensions will work in the same way through the PAYE system.

That's a good point. Certainly when in employment, if your tax code changed during the tax year, then you would get more ( or less) take home pay the next month, as the PAYE system recalculated. This is better as it means no need to wait for a refund/ extra tax bill.
I do not know whether this also is the case with pension payments . Hopefully someone can answer that ?

Penshnewbie

Albermarle said:

DT2001 said:

My OH is self employed but did a contract for 3 months last year on an employed basis. The 1st month they took 20% off everything and in the 2nd month, because HMRC had provided a tax code, she received a tax refund in her ‘pay packet’. I assume pensions will work in the same way through the PAYE system.

That's a good point. Certainly when in employment, if your tax code changed during the tax year, then you would get more ( or less) take home pay the next month, as the PAYE system recalculated. This is better as it means no need to wait for a refund/ extra tax bill.
I do not know whether this also is the case with pension payments . Hopefully someone can answer that ?

I've been told on MSExpert that with pension emergency tax you either get it back automatically at the end of the tax year; or, if you claim it back, you get it (in theory) within 30 days of your request. But I've also been told there is an HMRC backlog at the moment so there may be delays.

dunstonh

DT2001 said:

My OH is self employed but did a contract for 3 months last year on an employed basis. The 1st month they took 20% off everything and in the 2nd month, because HMRC had provided a tax code, she received a tax refund in her ‘pay packet’. I assume pensions will work in the same way through the PAYE system.

Correct.  The system uses the same payroll/PAYE methodology.   So, whilst month 1 will be wrong, if there are further payments over the remainder of the tax year, then the tax will correct itself by March 2023 without the need to send HMRC a form to get it back earlier.

RetSol

The system uses the same payroll/PAYE methodology.   So, whilst month 1 will be wrong, if there are further payments over the remainder of the tax year, then the tax will correct itself by March 2023 without the need to send HMRC a form to get it back earlier.

If I cash in a "small pot" with a resultant overpayment of tax, will the tax on my monthly db pension payment be automatically adjusted in a similar way? 

molerat

RetSol said:

The system uses the same payroll/PAYE methodology.   So, whilst month 1 will be wrong, if there are further payments over the remainder of the tax year, then the tax will correct itself by March 2023 without the need to send HMRC a form to get it back earlier.

If I cash in a "small pot" with a resultant overpayment of tax, will the tax on my monthly db pension payment be automatically adjusted in a similar way? 

No.  The automatic adjustment only applies to that particular "employment".  There is no correlation between the 2 unless HMRC manually intervene and it is very rare that they do. 

dunstonh

RetSol said:

The system uses the same payroll/PAYE methodology.   So, whilst month 1 will be wrong, if there are further payments over the remainder of the tax year, then the tax will correct itself by March 2023 without the need to send HMRC a form to get it back earlier.

If I cash in a "small pot" with a resultant overpayment of tax, will the tax on my monthly db pension payment be automatically adjusted in a similar way? 

Not normally.  Because there are no further payments to be made from that income source.  However, HMRC will pick it up in time (usually 18-24 months later as they wait for potential tax return submissions)