Widow/Pension

Bradley46

My dad passed away in August 2023. He had a pension with National Coal Board (NCB) My mum, as is wife is now the beneficiary. After discussions she opted to take out a cash lump sum. This was approximately £53000. She was advised it would be taxable and finally paid at the end of this month. She has received a sort of payslip for this payment and after tax she will only receive approximately £32000. Is this right? £21000 tax seems ridiculous. I believe my mum is currently on a normal state pension now my dad has passed.
Any advice would be much appreciated.
Thank you 

Dazed_and_C0nfused

Bradley46 said:

My dad passed away in August 2023. He had a pension with National Coal Board (NCB) My mum, as is wife is now the beneficiary. After discussions she opted to take out a cash lump sum. This was approximately £53000. She was advised it would be taxable and finally paid at the end of this month. She has received a sort of payslip for this payment and after tax she will only receive approximately £32000. Is this right? £21000 tax seems ridiculous. I believe my mum is currently on a normal state pension now my dad has passed.
Any advice would be much appreciated.
Thank you 

Yes.  It's almost certainly just the tax NCB would be obliged to take off such a large one off payment.

HMRC will review her tax position over the summer and automatically refund any overpaid tax (assuming she doesn't meet any criteria for Self Assessment).

Do you actually know what other taxable income she has?  Might be a lower State Pension till August then an increased amount after that?

Does she have any other pensions?

JGB1955

She is likely to have been taxed at 40% because HMRC believe she will receive £53K each month for February and March.  

molerat

Those amounts do not seem quite right but are close for a 1257M1 tax code being used, so £1048 tax free and the rest taxed as if it was a normal monthly payment received every month, something they have to do according to the tax rules.  Any overpaid tax will be refunded within a few months if she claims it. https://www.gov.uk/claim-tax-refund

If her only other income is her SP then if that is around £10K then around a £10K refund will be due.  Taking it as a lump sum has made her a higher rate tax payer this year.

She has received a sort of payslip for this payment

P45 ?

Bradley46

Dazed_and_C0nfused said:

Bradley46 said:

My dad passed away in August 2023. He had a pension with National Coal Board (NCB) My mum, as is wife is now the beneficiary. After discussions she opted to take out a cash lump sum. This was approximately £53000. She was advised it would be taxable and finally paid at the end of this month. She has received a sort of payslip for this payment and after tax she will only receive approximately £32000. Is this right? £21000 tax seems ridiculous. I believe my mum is currently on a normal state pension now my dad has passed.
Any advice would be much appreciated.
Thank you 

Yes.  It's almost certainly just the tax NCB would be obliged to take off such a large one off payment.

HMRC will review her tax position over the summer and automatically refund any overpaid tax (assuming she doesn't meet any criteria for Self Assessment).

Do you actually know what other taxable income she has?  Might be a lower State Pension till August then an increased amount after that?

Does she have any other pensions?

No just SP £735 pm and £15 Pension credit a week.

Dazed_and_C0nfused

Bradley46 said:

Dazed_and_C0nfused said:

Bradley46 said:

My dad passed away in August 2023. He had a pension with National Coal Board (NCB) My mum, as is wife is now the beneficiary. After discussions she opted to take out a cash lump sum. This was approximately £53000. She was advised it would be taxable and finally paid at the end of this month. She has received a sort of payslip for this payment and after tax she will only receive approximately £32000. Is this right? £21000 tax seems ridiculous. I believe my mum is currently on a normal state pension now my dad has passed.
Any advice would be much appreciated.
Thank you 

Yes.  It's almost certainly just the tax NCB would be obliged to take off such a large one off payment.

HMRC will review her tax position over the summer and automatically refund any overpaid tax (assuming she doesn't meet any criteria for Self Assessment).

Do you actually know what other taxable income she has?  Might be a lower State Pension till August then an increased amount after that?

Does she have any other pensions?

No just SP £735 pm and £15 Pension credit a week.

State Pension is never paid monthly so assuming £735 every 4 weeks (for the whole tax year) that would make her total taxable income to be £62,555 (Pension credit isn't taxable).

With the normal Personal Allowance of £12,570 her tax liability will be £12,314.

So if £21,000 tax has been deducted she will be due a refund of £8,686.

The above assumes she isn't Scottish resident for tax purposes.

Bradley46

Dazed_and_C0nfused said:

Bradley46 said:

My dad passed away in August 2023. He had a pension with National Coal Board (NCB) My mum, as is wife is now the beneficiary. After discussions she opted to take out a cash lump sum. This was approximately £53000. She was advised it would be taxable and finally paid at the end of this month. She has received a sort of payslip for this payment and after tax she will only receive approximately £32000. Is this right? £21000 tax seems ridiculous. I believe my mum is currently on a normal state pension now my dad has passed.
Any advice would be much appreciated.
Thank you 

Yes.  It's almost certainly just the tax NCB would be obliged to take off such a large one off payment.

HMRC will review her tax position over the summer and automatically refund any overpaid tax (assuming she doesn't meet any criteria for Self Assessment).

Do you actually know what other taxable income she has?  Might be a lower State Pension till August then an increased amount after that?

Does she have any other pensions?

No, nothing else.

xylophone

No just SP £735 pm and £15 Pension credit a week.

SP is not paid monthly but four weekly.

She will need to check on the Pension Credit position now that she has received the lump sum.  See p 15

https://www.ageuk.org.uk/globalassets/age-uk/documents/factsheets/fs48_pension_credit_fcs.pdf