Moved on to BR tax code and paying more tax?

BookerDeWitt

I have been retired for 3 and a half years, during which time I have made yearly UFPLS withdrawals from my pension. I recently asked for a £20K withdrawal and received a letter from my pension provider breaking down the payment as follows:

The payment of GBP14,871.80 has been issued in line with your instructions.

Your payment is broken down as follows:

• Gross payment GBP20,000.00

• Tax-free amount * GBP5,000.00

• Taxable amount GBP15,000.00

• Tax deducted GBP5,128.20

For comparison, last year I made a withdrawal of £18K gross, received £16,941 and got a tax refund of £818 earlier this year.

Today I received notification from HMRS that my tax code has changed, and looking online I see that it has changed from 1220L to BR.

I'm guessing the reason for the change is that I have two pension plans from my provider (with larger and smaller funds) and this year I asked for a withdrawal from my smaller plan for the first time. There have been no other changes in my circumstances.

Questions:

1. Why the tax deduction of £5,128? From what I can see BR pays tax at 20% so shouldn't that be £3K (20% of £15k)?

2. What is the implication of the BR code? Is that a temporary thing or will I be on that code indefinitely? Do I need to do anything to adjust/query the new code?

3. Will I receive a refund of overpaid tax next year as I usually do?

Thanks.

molerat

Have you taken anything from the other plan this year ?

Are both plans listed separately tax wise or is there only one "employer" showing ?

The BR code was likely issued after this payment so a different code may have been used.

BookerDeWitt

molerat said:

Have you taken anything from the other plan this year ?

Are both plans listed separately tax wise or is there only one "employer" showing ?

The BR code was likely issued after this payment so a different code may have been used.

No, this is the only deduction this year. I don't know if the plans are listed separately - one is a company pension when I was working freelance and had my own limited company and the other was a personal pension - both were originally via Equitable Life but now managed by Utmost.

molerat

Your on line tax account will show how many "employers" or different pension payers  you have listed

£5128.20 tax on a £15000 payment means the emergency code of 1257X has been used as is normal with all "new" pension payments so it looks like you may have 2 different pension payers listed so you need to check the codes listed for each pension.

Hoenir

BookerDeWitt said:

1. Why the tax deduction of £5,128? From what I can see BR pays tax at 20% so shouldn't that be £3K (20% of £15k)?

If this is the first withdrawl then you'll be taxed on an emergency code. What does the payslip show? 

All will eventually come out in the wash. 

Dazed_and_C0nfused

BookerDeWitt said:

I have been retired for 3 and a half years, during which time I have made yearly UFPLS withdrawals from my pension. I recently asked for a £20K withdrawal and received a letter from my pension provider breaking down the payment as follows:

The payment of GBP14,871.80 has been issued in line with your instructions.

Your payment is broken down as follows:

• Gross payment GBP20,000.00

• Tax-free amount * GBP5,000.00

• Taxable amount GBP15,000.00

• Tax deducted GBP5,128.20

For comparison, last year I made a withdrawal of £18K gross, received £16,941 and got a tax refund of £818 earlier this year.

Today I received notification from HMRS that my tax code has changed, and looking online I see that it has changed from 1220L to BR.

I'm guessing the reason for the change is that I have two pension plans from my provider (with larger and smaller funds) and this year I asked for a withdrawal from my smaller plan for the first time. There have been no other changes in my circumstances.

Questions:

1. Why the tax deduction of £5,128? From what I can see BR pays tax at 20% so shouldn't that be £3K (20% of £15k)?

2. What is the implication of the BR code? Is that a temporary thing or will I be on that code indefinitely? Do I need to do anything to adjust/query the new code?

3. Will I receive a refund of overpaid tax next year as I usually do?

Thanks.

That is very unlikely, far more likely is that your original pension still has tax code 1220L (or something similar) in place.

And your new pension now has a BR code allocated to it.

Do you think BR is wrong for this second pension?

Use of the emergency code (1257L) is quite normal on new pensions and you won't lose our overall.  As you have taken the monthly equivalent of £150,000 you will have been (provisionally) taxed at a mix of 0%, 20%, 40% and 45%.

You might be able to plan ahead slightly easier in future now you know your pension company is treating these as two separate pensions.