Overpayment of Income Tax...any advice?

Bloo

Hi

I took early retirement (Male, 64) and have no income until the State Pension other than the drawdown I have just started taking from my private pension. The second payment from the pension Co. had £91 income tax deducted, even though I am well below my threshold of £13829. This is confirmed by my record on GOV.uk. 

While I can mangew/out the £91 for now, how will this be resolved as I don't think any income tax should be deducted?

Should I contact HMRC, or the pension Co.? Will it resolve itself with a rebate from the pension Co.?

Thanks

MeteredOut

Do you do self assessment?

Marcon

Bloo said:

Hi

I took early retirement (Male, 64) and have no income until the State Pension other than the drawdown I have just started taking from my private pension. The second payment from the pension Co. had £91 income tax deducted, even though I am well below my threshold of £13829. This is confirmed by my record on GOV.uk. 

While I can mangew/out the £91 for now, how will this be resolved as I don't think any income tax should be deducted?

Should I contact HMRC, or the pension Co.? Will it resolve itself with a rebate from the pension Co.?

Thanks

Your pension provider should get a tax code from HMRC without any need for you to do anything, and the situation will resolve itself - but HMRC don't always issue codes quickly, so don't worry if it's several months before that happens.

Bloo

NoI haven't done so far. Should I? I'm not paying any NICs, as I've reached the beneficial limit

Marcon

Bloo said:

NoI haven't done so far. Should I? I'm not paying any NICs, as I've reached the beneficial limit

Not unless you're in a category which requires you to complete one: https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return

molerat

What tax code is set against the pension ?

Is your previous employment still showing up with a tax code allocated ?

Did you pass your P45 to the pension provider ?

even though I am well below my threshold of £13829

Do you mean you will not reach that for the whole year or have not reached that amount yet ?

Year to date you only need to have earned £9226 total before tax is due.

Bloo

The tax code set against the pension is 50TX. I haven't had employment for 3 years, been using savings after health problems, so have not passed a P45 to anyone.

I will not reach my threshold in the whole year, thought I'd been careful to avoid that. Total pension income for a full year would be £13281.

Don't understand the last line, why would tax kick in at £9226?

Thanks

Grumpy_chap

Bloo said:

Don't understand the last line, why would tax kick in at £9226?

The PAYE system works on the assumption that every month will be equal.
Standard personal allowance is £12,570 but you have stated your tax allowance is £13,829.
That is considered to accrue equally over the year (£1,152.42 per month).  
The tax year begins April so up to the end of November is 8 months.  £9,219  Slightly different if calculated in weeks rather than months, which is where the £9,226 has probably come from.
If your earning to date is above the £9,291 (or £9,226) then income at the moment will have tax deducted.  In that case, the income tax paid will be refunded as the end of the tax year approaches and it becomes apparent that the tax threshold will not be breached.

molerat

The question is why is that tax code allocated to the pension, where is the rest allocated ?

You need to contact HMRC and inform them that this is your only source of income (if it is) and tell them to allocate all of your allowance to it.

Don't understand the last line, why would tax kick in at £9226?

You get 1/12th of your annual allowance per month so year to date, M8, you would only be entitled to £9226 tax free with another £1153 each month going forward.

Bloo

Income so far this tax year is only £5300. The Income tax deduction appeared this month when I upped the drawdown 

Dazed_and_C0nfused

Bloo said:

The tax code set against the pension is 50TX. I haven't had employment for 3 years, been using savings after health problems, so have not passed a P45 to anyone.

I will not reach my threshold in the whole year, thought I'd been careful to avoid that. Total pension income for a full year would be £13281.

Don't understand the last line, why would tax kick in at £9226?

Thanks

That is highly likely to be for one of two reasons,

1.  HMRC have significantly overestimated your expected income so you are in tapered Personal Allowance territory (but this is unlikely).

2.  That tax code is old and can be updated if your contact HMRC to give them clear details about your circumstances in 2023-24.

Particularly important is the amount of pension you expect to receive in the current tax year from the company using tax code 50T.

Once a new tax code is issued the pension company should automatically refund any overpaid tax the first time they use the new tax code, you don't need to claim it back from HMRC.