Procedure for claiming back tax on pension withdrawal

Roger175

Could I jest check the procedure regarding reclaiming tax on a pension withdrawal.

My wife who is retired has 4 small DB pensions which are now in payment since her 60th birthday last Oct. She will have approx. £7,800 of her tax allowance available this tax year, so we are going to draw £10,000 from her SIPP with HL. £2,500 of this is tax free, with the remaining £7,500 subject to tax, but since she has £7,800 available, she will not actually pay this tax.

HMRC have given each of her 4 small pensions a separate tax code which add up to 1257. She would rather not attempt to get these changed for a one-off situation, since HMRC have repeatedly messed up these tax code and she has only just got it sorted.

Presumably, HL will deduct tax on the total pension payment and my wife can then claim it back when she does her self-assessment tax return?

We just want to make sure there is no problem doing things this way?

Dazed_and_C0nfused

Roger175 said:

Could I jest check the procedure regarding reclaiming tax on a pension withdrawal.

My wife who is retired has 4 small DB pensions which are now in payment since her 60th birthday last Oct. She will have approx. £7,800 of her tax allowance available this tax year, so we are going to draw £10,000 from her SIPP with HL. £2,500 of this is tax free, with the remaining £7,500 subject to tax, but since she has £7,800 available, she will not actually pay this tax.

HMRC have given each of her 4 small pensions a separate tax code which add up to 1257. She would rather not attempt to get these changed for a one-off situation, since HMRC have repeatedly messed up these tax code and she has only just got it sorted.

Presumably, HL will deduct tax on the total pension payment and my wife can then claim it back when she does her self-assessment tax return?

We just want to make sure there is no problem doing things this way?

You are correct.

There is nothing she needs to make a claim for, she simply completes her Self Assessment return as normal, including the pension income and PAYE tax, and that will be factored into her Self Assessment calculation.

If she overpaid for 2023-24 she can claim the overpayment as normal once her Self Assessment account is credited (it may be refunded automatically if she completes the return with the relevant details).

Just out of interest why does she need to complete tax returns each year 🤔

Roger175

Dazed_and_C0nfused said: Just out of interest why does she need to complete tax returns each year 🤔

Until last year we had a BTL property and she has therefore done a Self Assessment. Moving forward she probably won't need to do this, but she might as well do it this year just to address the pension issue.

Dazed_and_C0nfused

Roger175 said:

Dazed_and_C0nfused said: Just out of interest why does she need to complete tax returns each year 🤔

Until last year we had a BTL property and she has therefore done a Self Assessment. Moving forward she probably won't need to do this, but she might as well do it this year just to address the pension issue.

If she is sent a notice to file that makes sense if not she might have some complications further down the line if she just submits an unsolicited return.

Albermarle

Roger175 said:

Dazed_and_C0nfused said: Just out of interest why does she need to complete tax returns each year 🤔

Until last year we had a BTL property and she has therefore done a Self Assessment. Moving forward she probably won't need to do this, but she might as well do it this year just to address the pension issue.

For info, if you do not  do a self assessment return, then around 5 to 6 months after the tax year ends, HMRC will automatically carry out a tax calculation and refund any over due tax. 
Or you can claim it earlier by contacting them and filling in the relevant form.
It is useful to be registered for your personal tax account online. 

xylophone

https://www.thisismoney.co.uk/money/pensions/article-13135745/Pension-savers-hit-emergency-tax-50-000-HMRC.html

Qyburn

Albermarle said:

For info, if you do not  do a self assessment return, then around 5 to 6 months after the tax year ends, HMRC will automatically carry out a tax calculation and refund any over due tax. 
Or you can claim it earlier by contacting them and filling in the relevant form.
It is useful to be registered for your personal tax account online. 

I cant see any reason why anyone would need to wait until the middle of the next tax year.

Last year i did an SA tax return in April and got the refund a couple of weeks later in early May.

This year we each did the online form on the 31st January, and the tax refunds came through last week. It needs pretty much the sameiinformation as full a tax return, but of course some had to be estimated. The benefit is being able to claim before the end of yhe tax year.

https://www.gov.uk/guidance/claim-back-tax-on-a-flexibly-accessed-pension-overpayment-p55

Albermarle

I cant see any reason why anyone would need to wait until the middle of the next tax year.

You are right there is no need to wait. I was just pointing out that if you did nothing, you would still get back the overpaid tax at some point automatically.