Reclaiming Tax

nxdmsandkaskdjaqd

My income stream for this year is as follows:

State pension: £9420

SIPP: £4000.  £1000 tax free paid in late April and £1000 per month M1, M2 and M3.

I have just heard that my M1 will be taxed, at £149.40.

I have no other sources of income for the year and will be within my personal allowance.

How do I reclaim this for the 3 months and when can I do this? Can I do it now such that M2 and M3 are not taxed?

Dazed_and_C0nfused

I have just heard that my M1 will be taxed, at £149.40.

Which sounds spot on.  That is how Pay As You Earn works.  It's based on facts.

Your tax code is likely 315L so you can have c£263 pension income each month before paying tax on it.  You have seemingly chosen to take £1,000 in month 1 of the tax year so tax is due on c£737 hence the £149.40.

The only slight oddity is how you have "just heard" that tax will be deducted from a payment that made a month ago???

If you want to reduce the tax deducted at source you would need to take the income later in the tax year, when you have accrued more of the £263 tax code allowances.

nxdmsandkaskdjaqd

Dazed_and_C0nfused said:

The only slight oddity is how you have "just heard" that tax will be deducted from a payment that made a month ago???

Yes only just heard about the M1 tax.  i was under the impression that the 1st payment of £1000 in late April was Tax Free, so no tax.

Dazed_and_C0nfused

It's either a taxable amount or tax free.

Your op indicated £1,000 tax free and £1,000 taxable.

SIPP: £4000. £1000 tax free paid in late April and £1000 per month M1, M2 and M3.

If you have State Pension of £9420, from which DWP never deduct tax, your tax code would usually be 315L.

Is that not the case?

Or do you mean this is the first ever taxable payment taken from this particular pension?

NSG666

Doubt that you can prevent the tax being deducted in the first place but submit a tax return as soon as the final payment from your SIPP has been received. I took a UFPLS and it was taxed because it's the beginning of the tax year and I've not yet accumulated the full £12570 personal allowance but I've submitted a claim (as I did last year) and expect it to be paid back within a couple of months.

nxdmsandkaskdjaqd

Dazed_and_C0nfused said:

It's either a taxable amount or tax free.

Your op indicated £1,000 tax free and £1,000 taxable.

SIPP: £4000. £1000 tax free paid in late April and £1000 per month M1, M2 and M3.

If you have State Pension of £9420, from which DWP never deduct tax, your tax code would usually be 315L.

Is that not the case?

Or do you mean this is the first ever taxable payment taken from this particular pension?

Yes this is the first ever payment I have had from this pension.

So £1000 was paid out in late April which was the full £1000 so this I assumed was the Tax Free component.

Received an email yesterday that 

Dazed_and_C0nfused

So £1000 was paid out in late April which was the full £1000 so this I assumed was the Tax Free component.

Don't you know what you have taken from your own pension??  Was it £1,000 tax-free (lump sum) and £1,000 taxable or not?  Surely the pension company are acting on your instructions?

Anyway it looks to me like the taxable April payment probably had the emergency tax tax code (1257L) operated against it and as such no tax was deducted.

Then HMRC issued a more accurate tax code (302L) and tax has been deducted from the second taxable payment in May.

Nothing you have now posted suggests this is true.

I have just heard that my M1 will be taxed, at £149.40.

Dazed_and_C0nfused

SIPP: £4000.  £1000 tax free paid in late April and £1000 per month M1, M2 and M3.

Also perhaps you could clarify exactly what you meant by this.  To me you mean you have taken £1,000 tax free (lump sum), which is of no interest to HMRC.  And three taxable payments of £1,000 will also be taken.

The total amount taken from your pension being £4,000.  £1,000 is ignored for tax purposes and £3,000 is taxable income.

nxdmsandkaskdjaqd

Dazed_and_C0nfused said:

SIPP: £4000.  £1000 tax free paid in late April and £1000 per month M1, M2 and M3.

Also perhaps you could clarify exactly what you meant by this.  To me you mean you have taken £1,000 tax free (lump sum), which is of no interest to HMRC.  And three taxable payments of £1,000 will also be taken.

The total amount taken from your pension being £4,000.  £1,000 is ignored for tax purposes and £3,000 is taxable income.

Yes this is correct.

nxdmsandkaskdjaqd

NSG666 said:

Doubt that you can prevent the tax being deducted in the first place but submit a tax return as soon as the final payment from your SIPP has been received. I took a UFPLS and it was taxed because it's the beginning of the tax year and I've not yet accumulated the full £12570 personal allowance but I've submitted a claim (as I did last year) and expect it to be paid back within a couple of months.

So, once I have received the full £4000 (£1000 tax free and 3 payment of £1000). I can submit a Tax Return for 2022/23, is this right?

molerat

You don't need to submit a tax return just a tax reclaim  https://www.gov.uk/claim-tax-refund

So you have taken £1000 tax free lump sum in M1 and will be taking £1000 fully taxable in M2, M3 and M4.  Unless there was a need for the money straight away it would likely have been better to take a small sum early, get HMRC to issue a code, get them to correct it by removing the M1 (something they do for no other reason than they are unsure of future withdrawals but once put in the picture they will remove it) suffix and taking the rest at the end of the year.  If you are going to do this regularly leaving it until the end of the year saves any reclaiming - I have BR on mine so take it early, MrsM has a code so takes hers in M12.