Tax treatment of Teacher's Pension Refund due to Goodwin Ruling

lib21by

Now cleared with HM R&C - They had assumed that the Goodwin refund was a sudden increase in my ANNUAL income, and issued a code for 2023/2024 which pushed me into a higher tax bracket. They will now re-code me back to where I was

lib21by

Oh dear. I thought that I had sorted my 'Goodwin refund' problem, but no. I have just received an assessment from HMRC for 2022-2023. In it, they are showing the refund as income, which is correct.
But the amount of this income brings me well above the 20% tax limit, with all the excess over that limit is being charged at 40%
I don't think that this is fair, as the refund covered an underpayment by Teachers Pensions spread over a period of 15 years. If it had been paid correctly bit by bit over these years, all my income each year would have been charged at the normal lower rate.

Jeremy535897

lib21by said:

Oh dear. I thought that I had sorted my 'Goodwin refund' problem, but no. I have just received an assessment from HMRC for 2022-2023. In it, they are showing the refund as income, which is correct.
But the amount of this income brings me well above the 20% tax limit, with all the excess over that limit is being charged at 40%
I don't think that this is fair, as the refund covered an underpayment by Teachers Pensions spread over a period of 15 years. If it had been paid correctly bit by bit over these years, all my income each year would have been charged at the normal lower rate.

See my post of 26 April.

[Deleted User]

Assuming you filed a self assessment return for 2022/23, what amount of the arrears did you include for your teacher's pension?

Did you include just the arrears that related to that tax year? If so then you should appeal the assessment.

The notice of assessment from HMRC should explain how to appeal.

Your grounds of appeal would be the that arrears should be allocated to each of the tax years in which they accrued.

lib21by

No, because I don't fill in any self-assessment [ never have, or been asked to, possibly because my income/tax position has always been relatively simple - I just have DWP pension + my own company pension ]. The refund was taxed by Teachers Pensions at 20% before I received it. HMRC were quite aware, and I then had to argue with them over the code they issued for the following year, as they assumed that, going forward. this was now an annual addition to my income !
The 'Simple Assessment Tax Calculation for 2022-2023' appeared on form  PA302 which HMRC sent to me this week. I shall write to them, I just wondered if anyone else had come across this problem, or had an opinion.
Of course I agree with your last line. And if by some strange rule HMRC are correct, then Teachers Pensions could have asked me if I wanted the refund to be released over sufficient years to clear the 40% situation !

molerat

As per Jeremy535897's post(s)

Do you have a breakdown of how the back payment applies to each year ? (although the actual amounts may not really be relevant if it is low enough per year when divided out)

Contact HMRC and tell them that it is a back payment and covers the tax years xxxx to yyyy and they should apply the tax accordingly.  The interest part would be taxed in the year received.

lib21by

Yes, helpfully supplied by Teachers Pensions in Sept 2022, when the refund was first advised to me. The yearly amount varied from £2200 rising gradually each year through the period to a maximum of £2900, Such amounts would not bring me into a higher tax bracket.
Thanks to those who have encouraged me. I shall put pen to paper tomorrow. No doubt it will all take time, but I shall try to remember to come back to this thread to let you know how it goes.

[Deleted User]

I wasn't sure if you had self assessed as your opening post about the interest you received mentioned SA.

Please do keep the thread updated about how this progresses and if you have any further difficulties advice can be given.

Hopefully you will be to say the issue has been resolved. 

lib21by

No not self-assessed. They sent me their form PA302 (Simple Assessment)

lib21by

Still waiting for HMRC to reply ( after 4 weeks ), so I have written again