Have children and have lost your unmarried, co-habiting partner? You may now be eligible to claim

michelefauk

 My partner died in 2016 and our daughter was 11 at the time. I applied for backdated WPA following the new legislation. I received £33000 in backdated payment lump sum and am receiving £324 fortnightly although this will be ending in August as my daughter is going to uni in September. I have no idea of the tax implications which frightens me a lot, I’m worried they are going to come back and ask for 20% of the lump sum back for tax! I haven’t received anything from HMRC about it.  

HillStreetBlues

The MSE article linked to on te  opening post does state it's taxable.
Why are you frightened on paying tax on it, if you have received the money?

calcotti

michelefauk said:

 My partner died in 2016 and our daughter was 11 at the time. I applied for backdated WPA following the new legislation. I received £33000 in backdated payment lump sum and am receiving £324 fortnightly although this will be ending in August as my daughter is going to uni in September. I have no idea of the tax implications which frightens me a lot, I’m worried they are going to come back and ask for 20% of the lump sum back for tax! I haven’t received anything from HMRC about it.  

I can't find any guidance of how it will be taxed.

It is definitely taxable (as you are aware) but it could make a big difference whether it is all taken account  in the tax year it is received or treated as received in the years it would have been made had you been able to claim in 2016.

For State Pension, to the best of knowledge, arrears would be treated as if payment had been paid in the tax year that the amounts should have been paid. Hopefully they will do the same for WPA. 

It may be sensible to inform HMRC about the payment you have received. Until the taxation is known it would be sensible to set 20% aside.

michelefauk

HillStreetBlues said:

The MSE article linked to on te  opening post does state it's taxable.
Why are you frightened on paying tax on it, if you have received the money?

I mean I’m frightened to spend it in case they want a big chunk back for tax 

michelefauk

I suppose whichever way they take the tax, it is still going to be 20% of the £33000 they will want I think? I did find this article but I’m not really sure how my tax code would be adjusted to payback the tax. 

HillStreetBlues

michelefauk said:

I mean I’m frightened to spend it in case they want a big chunk back for tax 

Understand now, thanks for explaining.

As calcotti has stated put aside 20%.
It could be less than that but ring fence the 20% until it's fully settled.

If would be unfair if you ended up paying more tax having it as a lump sum,  than if it was paid over the course of the intervening years.

calcotti

michelefauk said:

I suppose whichever way they take the tax, it is still going to be 20% of the £33000 they will want I think? I did find this article but I’m not really sure how my tax code would be adjusted to payback the tax. 

Not necessarily. If the arrears are allocated to the tax years in which they ‘should’ have been paid then there may be no tax liable. it will depend on whether you had already received taxable income and used up your tax free allowance for those years or would the WPA would take you over the tax free threshold.

michelefauk

I’m already over the tax threshold and pay tax on my salary 

calcotti

michelefauk said:

I’m already over the tax threshold and pay tax on my salary 

In that was case through all of the years from 2016 you will, as you suggested, be taxed 20% on what you have received (unless this takes into a higher tax band).

calcotti

michelefauk said:

I’m already over the tax threshold and pay tax on my salary 

In that was case through all of the years from 2016 you will, as you suggested, be taxed 20% on what you have received (unless this takes into a higher tax band).