Withdraw money and tax question

doris540

In July withdrew £8k from a private pension. Paid as expected too much tax. Understand can just leave it till end of tax year or fill out P55 form and reclaim it earlier. Spoke to HNRC this morning they said if i wasnt going to withdraw anymore this tax year i could fill out form takes 30 days to process. I have all the ref numbers etc. My question is if i do fill out form and then have to access more funds within this tax year what will happen. I was of the understanding that once you had accessed a pension anymore withdrawn would be taxed at the normal rate no matter when you did it. Im a normal rate taxpayer and still would be.

Mutton_Geoff

doris540 said:

In July withdrew £8k from a private pension. Paid as expected too much tax. Understand can just leave it till end of tax year or fill out P55 form and reclaim it earlier. Spoke to HNRC this morning they said if i wasnt going to withdraw anymore this tax year i could fill out form takes 30 days to process. I have all the ref numbers etc. My question is if i do fill out form and then have to access more funds within this tax year what will happen. I was of the understanding that once you had accessed a pension anymore withdrawn would be taxed at the normal rate no matter when you did it. Im a normal rate taxpayer and still would be.

This is because HMRC has assumed your one off withdrawal would be regular and taxed you accordingly (they call it M1 or month 1 tax). By saying you won't take any more out just enables them to calculate the correct amount of tax combined with any other income you have. It won't restrict you taking more out this tax year just because you told them you wouldn't but you'll just get taxed again in the same way and can adjust once more at the end of the tax year or by contacting them.

https://www.ii.co.uk/support/month-one-tax

molerat

Have you checked your on line tax account to see what code has been allocated to the pension ?  If you take another withdrawal it will be in accordance with that code which may take the first withdrawal into consideration and automatically refund any overpaid tax along with the second withdrawal.

wjr4

doris540 said:

I was of the understanding that once you had accessed a pension anymore withdrawn would be taxed at the normal rate no matter when you did it. Im a normal rate taxpayer and still would be.

This is incorrect. If your earnings/pension income falls into the higher/additional rate brackets then you will pay this tax on that part of the money. It is taxed at your marginal rate. 

eskbanker

doris540 said:

In July withdrew £8k from a private pension.

How did you withdraw that, i.e. was it a UFPLS withdrawal (25% tax-free, 75% taxed), or a crystallisation event in which the £8K was all tax-free, or a fully taxable withdrawal after previously accessing tax-free sums, or something else?