HMRC taking too much tax on ad hoc pension drawdown - anyone else experienced this?

Lagrange

Dazed_and_C0nfused said:

Lagrange said:

There can't be a loss of Personal Allowance in this situation.  The pension payer simply operates the tax code they have and applies the tax free allowances based on that code followed by the 20/40/45% tax rates applicable.

My mistake. The PAYE system cannot cope with annual income over £100k. I understand this is one reason why everybody with income over this level need  to complete a tax return. 

Although HMRC require a Self Assessment return in these cases PAYE can cope with income over £100k

But it's not an employer/pension payers job to alter tax codes each time a payment is made.  They simply operate the tax code they have and deduct the appropriate amount of tax.

If the tax code was calculated using an estimate of say adjusted net income of £95k and a salary or pension payment took adjusted net income over £100k it isn't the employer/pension providers job to recalculate the tax code.

The taxpayer could do that through their Personal Tax Account or HMRC would do it if the tax code was reviewed but it's not something the employer/pension payer gets involved in.

By cope I meant that the tax deducted for the year under PAYE is calculated incorrectly which is why a tax return is required.  

Pat38493

Lagrange said:

Dazed_and_C0nfused said:

Lagrange said:

There can't be a loss of Personal Allowance in this situation.  The pension payer simply operates the tax code they have and applies the tax free allowances based on that code followed by the 20/40/45% tax rates applicable.

My mistake. The PAYE system cannot cope with annual income over £100k. I understand this is one reason why everybody with income over this level need  to complete a tax return. 

Although HMRC require a Self Assessment return in these cases PAYE can cope with income over £100k

But it's not an employer/pension payers job to alter tax codes each time a payment is made.  They simply operate the tax code they have and deduct the appropriate amount of tax.

If the tax code was calculated using an estimate of say adjusted net income of £95k and a salary or pension payment took adjusted net income over £100k it isn't the employer/pension providers job to recalculate the tax code.

The taxpayer could do that through their Personal Tax Account or HMRC would do it if the tax code was reviewed but it's not something the employer/pension payer gets involved in.

By cope I meant that the tax deducted for the year under PAYE is calculated incorrectly which is why a tax return is required.  

This was my experience in a few years when I earned over 100K - regardless of my tax code, I ended up having to pay an additional tax payment when I put in my tax return.

Eldi_Dos

MissBojangles said:

I am going to have to withdraw enough to allow HMRC to take 40%, then fill in a P55 and wait 4/5 months for them to give me my refund, which all the time should have remained in my pension pot gaining interest!

Has anyone else experienced this?

Is there a mechanism where tax rebates caused by wrong application of tax codes can be paid back into a sipp rather than a bank account.

Dazed_and_C0nfused

Eldi_Dos said:

MissBojangles said:

I am going to have to withdraw enough to allow HMRC to take 40%, then fill in a P55 and wait 4/5 months for them to give me my refund, which all the time should have remained in my pension pot gaining interest!

Has anyone else experienced this?

Is there a mechanism where tax rebates caused by wrong application of tax codes can be paid back into a sipp rather than a bank account.

Eldi_Dos said:

MissBojangles said:

I am going to have to withdraw enough to allow HMRC to take 40%, then fill in a P55 and wait 4/5 months for them to give me my refund, which all the time should have remained in my pension pot gaining interest!

Has anyone else experienced this?

Is there a mechanism where tax rebates caused by wrong application of tax codes can be paid back into a sipp rather than a bank account.

Not by HMRC no.  The op could do providing they are within tax relief/annual allowance limits

MissBojangles

Thank you all so much!  I really appreciate your knowledge.

To bring you up to date:

I have now spoken to HMRC three times:
1) (Nov - after the first ad hoc payment) I was told to complete a P55 in order to get my tax overpayment back, which I did.
2) (Jan - after second ad hoc payment) I was told that the first P55 was in a queue and that I needed to complete a second P55 in order to request the second tax overpayment back.  As the wait time is more than 3 months, I shouldn't expect anything any time soon.
3) (Jan - next day) Aegon suggested I try HMRC again as they were sure I had not been given the correct information.  I got through to a very helpful lady who said I had been given incorrect information the previous two times and I did not need to fill in a P55.  She also said it would be helpful to swap my 'T' and 'L' around so that 'L' is on Aegon and not L&G, but this can't be done now so near to tax year end.  She said she's put me on a cumulative code and that I should get a refund of both overpayments in my next monthly pension drawdown payment.  She did say that this will happen again though and, should I require more ad hoc payments, I should budget for HMRC taking out more than I think they will.

HMRC have changed my tax codes. They did this the day they processed my last ad hoc payment (17 Jan).  I was unaware so only posted the current (new codes) when I made my original post.

Previous:
L&G - 209LX
Aegon - 897TX

From 17 Jan:
L&G - 224L
Aegon - 882T

HMRC also have a £1499 beneficial loan deduction from Legal & General on my tax code, which is why many of you picked up the deduction in personal allowance.  I retired 2 years ago and when I was working I did have a staff mortgage but this was paid off when I finished work and this deduction has never showed up on my L&G pension before.  I have asked for this to be removed.

badmemory

The X on your previous tax codes explain it all.  Can you check back on your last 2 yrs of codes & make sure they haven't slipped extras through that you didn't notice back then?  I'm not at all knowledgable on staff mortgages but if you only had it for a part year then maybe it shouldn't have affected your code as much as it did in your final year.