Voluntary Severance end of September: Pension contributions to become Basic Rate from Higher Rate

ManMadeWays

I am a higher rate taxpayer being offered a Voluntary Severance deal. I'm 62 this year so likely this is retirement as well.

I plan to salary sacrifice 100% of my September pay, VS (>£30k) and 3 months PILON into my DC pension, just keeping the Tax free £30k and a couple of non pensionable payments (car allowance etc) to be paid.

This will take me from HR to Basic rate,  as I am on a normal 1257L tax code will the tax/NI "correct" in September and I'd get a tax/NI refund in September pay as well ?

I will not have any further earnings in this tax year, living off the £30k, only drawing from DC pot in 25/26.

If not I assume it's a call to tax office or a Self Assesment form at end of year ?

Cheers

Dazed_and_C0nfused

The tax due by 5 October (tax month 6) will be based on your taxable earnings at that point.

So with the standard emergency code of 1257L being used on a cumulative basis you would only pay some higher rate tax if your taxable earnings were above £25,135.

But that really isn't something to be concerned about.  As you won't have any further income to be taxed under PAYE in the same tax year you will be due a refund come what may.  Based on what you have posted at least.

What makes you think a Self Assessment return might be necessary 🤔

ussdave

Probably worth double checking that you can definitely SS your PILON.  At my workplace this isn't supported for people taking VS.

ManMadeWays

ussdave said:

Probably worth double checking that you can definitely SS your PILON.  At my workplace this isn't supported for people taking VS.

Thanks-good point, I will ask once it's agreed

ManMadeWays

Dazed_and_C0nfused said:

The tax due by 5 October (tax month 6) will be based on your taxable earnings at that point.

So with the standard emergency code of 1257L being used on a cumulative basis you would only pay some higher rate tax if your taxable earnings were above £25,135.

But that really isn't something to be concerned about.  As you won't have any further income to be taxed under PAYE in the same tax year you will be due a refund come what may.  Based on what you have posted at least.

What makes you think a Self Assessment return might be necessary 🤔

My taxable earnings at that point will be under HR for the whole years allowance but in excess of the P6 !!!!!! allowance of £25,135.

HMRC dont know if I will earn again in 24/25 so I guess I have to contact them for a refund, SA is a way of doing that but maybe overkill then.

Dazed_and_C0nfused

ManMadeWays said:

Dazed_and_C0nfused said:

The tax due by 5 October (tax month 6) will be based on your taxable earnings at that point.

So with the standard emergency code of 1257L being used on a cumulative basis you would only pay some higher rate tax if your taxable earnings were above £25,135.

But that really isn't something to be concerned about.  As you won't have any further income to be taxed under PAYE in the same tax year you will be due a refund come what may.  Based on what you have posted at least.

What makes you think a Self Assessment return might be necessary 🤔

My taxable earnings at that point will be under HR for the whole years allowance but in excess of the P6 !!!!!! allowance of £25,135.

HMRC dont know if I will earn again in 24/25 so I guess I have to contact them for a refund, SA is a way of doing that but maybe overkill then.

You don't have to do anything.  Assuming you don't meet any Self Assessment criteria HMRC will review things once the tax year ends and let you have details of any overpaid tax, usually in the summer.

If you want it quicker then once your employer has filed your final pay details and you have your P45 you could apply for a refund using form P50.  But that is only a provisional refund, the final position will still be reviewed once the tax year has ended.

ManMadeWays

Dazed_and_C0nfused said:

ManMadeWays said:

Dazed_and_C0nfused said:

The tax due by 5 October (tax month 6) will be based on your taxable earnings at that point.

So with the standard emergency code of 1257L being used on a cumulative basis you would only pay some higher rate tax if your taxable earnings were above £25,135.

But that really isn't something to be concerned about.  As you won't have any further income to be taxed under PAYE in the same tax year you will be due a refund come what may.  Based on what you have posted at least.

What makes you think a Self Assessment return might be necessary 🤔

My taxable earnings at that point will be under HR for the whole years allowance but in excess of the P6 !!!!!! allowance of £25,135.

HMRC dont know if I will earn again in 24/25 so I guess I have to contact them for a refund, SA is a way of doing that but maybe overkill then.

You don't have to do anything.  Assuming you don't meet any Self Assessment criteria HMRC will review things once the tax year ends and let you have details of any overpaid tax, usually in the summer.

If you want it quicker then once your employer has filed your final pay details and you have your P45 you could apply for a refund using form P50.  But that is only a provisional refund, the final position will still be reviewed once the tax year has ended.

Form P50 thats what I needed to know ! Cheers