Tax on pension withdrawal

Isleofcebu

Hello, I withdrew an amount from a SIPP I hold with Hargreaves Lansdowne. The amount was £12000, I received tax relief of 25% and the remainder was taxed at the normal rate with £1800 being paid to HMRC. My account was credited with the remainder £9000. I am in full time employment but also have a small business so complete self assessment each year. When I completed my return the amount in the pension section was £9000 with tax paid recorded correctly as £1800. However, when I look at my taxable income it includes the salary I receive from my employer, my income from self employment plus the £9000 I received from a pension. I have then had 20% tax deducted from this amount. I have spoken to HMRC about this but got nowhere! I don't understand why I have been taxed on the £9000 when the amount I withdrew was already taxed at source and the £9000 was what remained after this. Sorry if this is a long message and not clear!  Its driving me mad!  Please can you let me know if this is correct, should I be taxed twice on the pension? Yours, very confused, Christine!

Dazed_and_C0nfused

How are you being taxed twice???

If I have understood you correctly you took £12,000.  £3,000 was TFLS and £9,000 was taxable income.  And £1,800 tax was provisionally deducted under PAYE.

Your Self Assessment then determines the actual amount of tax due.  Which might be £1,800.  Or could be more.  Or less.

xylophone

Hello, I withdrew an amount from a SIPP I hold with Hargreaves Lansdowne. The amount was £12000, I received tax relief of 25% and the remainder was taxed at the normal rate with £1800 being paid to HMRC. My account was credited with the remainder £9000. 

I can't follow the figures.

You decided to withdraw £12,000.

You received £3000 tax free?

The £9000 was taxed at 20%?

You therefore received  £7200 after tax?

Total credit to your  bank account £10,200?

You mention that in addition to the pension income, you receive  a salary from your employment and self employment income.

Are you sure that your total taxable income did not take you into 40% territory so that   you owed tax in excess of 20% on the pension income?

QrizB

I'm glad to see I'm not the only one confused by the OP's numbers!

Isleofcebu

I'm sorry, I am so confused by it all myself! The figures are:
I applied to withdraw £12000. From this I received 25% tax free leaving £9000. I was taxed at source £1800 on £9000.
My self assessment submission clearly states this, in fact these figures had been automatically generated when I started the self assessment submission.
Despite my paying £1800 tax on the £9000 the £9000 has been added to my annual income and I have been taxed on the total which includes my income from employment, income from self employment and the £9000.
I do not earn over £40000 regretfully so am taxed at basic rate.
I hope that makes things a little clearer.
Thank you!

optoutDB

You said the 1800 tax paid is also recorded, so I assume that comes off the Tax due somewhere at the end ??

MX5huggy

You have been taxed on the employment as well how is this shown on the SA form/site? 

molerat

It is part of your annual income in the same way as your employment and self employment incomes are so everything you earn is added up, the amount of tax due on that amount is calculated, the tax already paid from the various sources is deducted leaving how much tax is under or overpaid.

Albermarle

In simple terms with the SA, it calculates  all the tax you were liable for and then takes away all the tax you actually paid. 

dunstonh

Despite my paying £1800 tax on the £9000 the £9000 has been added to my annual income and I have been taxed on the total which includes my income from employment, income from self employment and the £9000.

The £9000 should be added to your annual income.   The £9000 is income.

However, the £1800 should be added to the tax.

xylophone

https://www.litrg.org.uk/tax-guides/tax-basics/how-do-i-work-out-my-tax

Have you calculated tax due as above?

And how much you paid?

Is there any difference?

Is tax due or overpaid?