Cashed in tiny pension > claiming excess tax refund

Blue_Parrot

I'm posting about this in case it helps other people.

I recently cashed in a tiny previous-employer pension fund. As anticipated, Aviva deducted tax at 40% ( because that's what they do, not having your tax code) and it's now up to me to claim back about £2,500+ excess tax deducted.

Using this website's advice: https://www.moneysavingexpert.com/reclaim/overpaid-pension-tax/ I filled in form P50Z. This is because my only source of income is the State Pension.

HOWEVER, the questions on the form seem to "think" that I've just left paid employment, which is why I now have the P45 from Aviva. (I had to get that first, to fill in the P50Z.)

But my paid employment ended in 2017, when I had to retire to care for my husband - and my state pension had already started.

Eventually I realised that they mean "when did you cash in your pension and get hold of the P45"? (But surely they already know that: Aviva would have told them.)

Some of the questions refer to State Benefits. Do you receive any State Benefits? The answer would be yes, because State Pension is a State Benefit. But if you reply "Yes" you get drawn into bizarre questions about how much state pension have you received since you "retired"? Since I retired over six years ago, and they know this, and they know exactly how much they've paid me, I was not about to do hours of research to add up all the state pension payments received. So I back-buttoned and answered No, I do not receive any state benefits. THEN I realised that they don't really mean the state pension, they mean taxable benefits such as Carer's Allowance, Incapacity Benefit, Job Seekers Allowance  and so on. (Having said that, I get a tax bill every year regarding my state pension.)

Here's another one: Have you received any income since you stopped working? Well....yes...the state pension. But if you interpret that literally, you're drawn down a rabbit hole about your state pension (see paragraph above), so I answered no.

Have you claimed any state benefits since the start of the tax year? Well, I didn't have to "claim" my state pension, that was dealt with years ago, is that what you mean?

Are you likely to receive benefits during the rest of this tax year? Well, yes, the state pension. But (as above) I answered no, because they don't really mean the state pension.

I reviewed my answers many times and eventually pressed submit. (sigh).

Oh and another thing. The form says they'll SEND me a "payable order". Why can't they pay it into my bank, the details of which they already have to pay my state pension!!

I hope this long post helps other people.

Devongardener

I filled the form for a similar small pension claim, and  I found it a simple process.  

The state pension isn’t a state benefit as such.  

You are required to submit the the P45 the pension company sent you to speed the process, so that the details are available without their having to link it. 

 I received my tax refund quickly, and straight into my bank account, which I entered when completing the form.  The department of works and pensions paying your state pension is not linked to the one in HMRC dealing with income tax so they wouldn’t have access to those detail. 

Blue_Parrot

 I received my tax refund quickly, and straight into my bank account, which I entered when completing the form.  The department of works and pensions paying your state pension is not linked to the one in HMRC dealing with income tax so they wouldn’t have access to those detail. 

I was sat here all ready to key in my bank account details, but no such fields came up. Just out of interest, which form were you filling in? Mine was the P50Z.

Regarding your other valid point, a quick search came up with: "DWP and HMRC work very closely together, and share information often. This is because benefits and pensions are affected by how much you earn and the National Insurance contributions you have paid." And: "The Department for Work and Pensions (DWP) has direct links to HM Revenue & Customs (HMRC) to tell them about these benefits."

Dazed_and_C0nfused

Blue_Parrot said:

 I received my tax refund quickly, and straight into my bank account, which I entered when completing the form.  The department of works and pensions paying your state pension is not linked to the one in HMRC dealing with income tax so they wouldn’t have access to those detail. 

I was sat here all ready to key in my bank account details, but no such fields came up. Just out of interest, which form were you filling in? Mine was the P50Z.

Regarding your other valid point, a quick search came up with: "DWP and HMRC work very closely together, and share information often. This is because benefits and pensions are affected by how much you earn and the National Insurance contributions you have paid." And: "The Department for Work and Pensions (DWP) has direct links to HM Revenue & Customs (HMRC) to tell them about these benefits."

That is true but I don't think it extends to sharing bank account details.

Blue_Parrot

Have I filled in the wrong form? I took guidance from this forum (as in original post). At no point was I invited to fill in my bank details, as Devongardener was.

Easyjet77

Blue_Parrot said:

Have I filled in the wrong form? I took guidance from this forum (as in original post). At no point was I invited to fill in my bank details, as Devongardener was.

I think you have used incorrect form. In similar circumstances I used p53z with ease and hassle free.

eskbanker

Blue_Parrot said:

Using this website's advice: https://www.moneysavingexpert.com/reclaim/overpaid-pension-tax/ I filled in form P50Z. This is because my only source of income is the State Pension.

That page says:

• Emptied your pension and have no other income in that tax year? Use P50Z.
  
  
• Emptied your pension but do have other taxable income that tax year? Use P53Z.
  
  
• Haven't emptied your pension pot? Use P55.

so, as state pension is taxable income, I'd have thought that P53Z would be the one to use....

Pat38493

Yes - technically state pension is taxable income even though it might be at a rate of zero.

molerat

And if you go this route and answer the questions correctly it takes you to the correct form

https://www.gov.uk/claim-tax-refund

And, as eskbanker said, answering what I picked up from op's post it took me to a P53Z

Blue_Parrot

I had a long look at P53Z and decided not to use it, as follows:

Question 9: Your employer PAYE reference number. Which employer? My last one which ended in 2017, or the one to which this pension pertains which ended in 1994? Either way, I have no idea. (Assuming that employers have different prefixes...)

Question 13: Have you or do you expect to receive income from any UK pension during the tax year 2023 to 2024? Do you mean this pension I'm cashing in? I have never had any income from it, then I cashed it in. So is that a Yes or a No?

And so on. It seems to me that these forms were not designed for this purpose, which is - I had to retire in 2017. Before that I had a job which came with a pension. I'm now cashing that in. End of story!

I also have to note that at the end of P53Z it says:
How we’ll make your repayment.

When we’ve worked out any repayment due to you, we’ll send you a cheque. We can send this direct to you at your home address or to your nominee’s address. The cheque can only be paid into an account held in your name or your nominee’s. Repayments cannot be made by Bacs (Bankers Automated Clearing Service).

That's why I wondered how Devongardener got his/her refund straight to his/her bank account. There is nowhere on this form to enter your bank details.

AND according to that form, you have to post them the completed form and the P45.
We cannot deal with your claim without parts 2 and 3 of your P45 form,..... who would trust Royal Mail with vital original documents these days?

...........

It occurs to me that the https://www.moneysavingexpert.com/reclaim/overpaid-pension-tax/ link may be out of date - it might lead people (like me) to incorrect/out of date versions of these forms? If that's the case, the link should be updated?

Marcon

eskbanker said:

Blue_Parrot said:

Using this website's advice: https://www.moneysavingexpert.com/reclaim/overpaid-pension-tax/ I filled in form P50Z. This is because my only source of income is the State Pension.

That page says:

• Emptied your pension and have no other income in that tax year? Use P50Z.
  
  
• Emptied your pension but do have other taxable income that tax year? Use P53Z.
  
  
• Haven't emptied your pension pot? Use P55.

so, as state pension is taxable income, I'd have thought that P53Z would be the one to use....

Certainly confusing.

HMRC refers people to this website if they need help: https://taxvol.org.uk/index.php/hrf_faq/how-do-i-claim-back-tax-when-i-cash-in-a-small-pension/

The relevant section appears to be:

If you take all of your money out of a pension pot

If you pay your tax under PAYE you can claim the overpaid amount back during the tax year. Your scheme provider should provide you with a P45 showing details of the payment. You may have to send this form to HMRC when you claim a repayment.

If you have no other income or just receive your State Pension, use form P50Z.

If you have other PAYE income, use form P53Z. You can either telephone HMRC for the forms (telephone number given at the bottom of this section), or search www.GOV.UK for P50Z, P53Z.

This ability to claim back tax during the tax year applies if you have taken everything out of a pension pot. For instance, you had £20,000 with XYZ Mutual and have taken all of the money and tax has been taken under PAYE. There is nothing left with XYZ Mutual (though you might still have another pension pot – say, £10,000 with ABC Investments – that you have not touched; that does not matter).

If you do not send in a claim during the tax year, HMRC should look at all of your PAYE records after the end of the tax year. Where there has been a tax overpayment of any amount or an underpayment of at least £50, HMRC will send you a ‘P800’ calculation. This should pick up on overpayments that haven’t been claimed within the tax year. But if the system fails, you may not hear from HMRC or you may get a P800 calculation that is incorrect, so you need to try to understand your situation for yourself.

If you usually complete a self-assessment tax return, you will have to wait until the end of the year to balance your account.