Withdraw lump sum from Pension BR tax code.

TheSpectator

molerat said:

TheSpectator said:

Hendog said:

RogerPensionGuy said:

An interesting story here and very unwanted for the OP.

I have heard a fair few stories of people starting pension payments and they weren't and were not made aware of a few problem outcomes like paying the correct tax and not being aware of the MPAA.

Looking at the opening poster, I just see 400Kish. Take 100Kish Tax Free, 50Kish @ 20% Tax and 250Kish @ 40% Tax so Tax looks like 110Kish.

To the opening poster, did you think the Tax was correct when getting the money?

As your pension people said it was correct, I do wonder if they will come good or maybe meet you half way with the current Tax bill.

Hi yes I did think the tax was right as that’s what the pension company said. I thought I would have paid more that’s why I ask them. 

At the moment I have asked HMRC to investigated it as to why it was done on a BR code as I believe from what I have now researched and been told it should have been done as emergency taxed, and then the overpaid tax I should’ve been able to claim back.  I am waiting to see what HMRC come back with and then decide what to do. 

I’ve been told not to contact the pension company as HMRC should investigate it 1st and if the pension company are at fault HMRC deal with it. 

Would be very nice if they did offer to pay some off it if they are at fault but it also could be HMRC at fault or it could be all correct and I have to pay it.

How can HMRC be at fault if they hadn't issued a tax code? Technically the pension provider should have used the emergency tax code (personal allowance on a week/month 1 basis) and there are rare circumstances where an employer can be held liable for an under-deduction but if HMRC accept the error was made in good faith (and the prob will) then you need to start thinking now how you will repay the amount owing.

Personally I don't see how you could think that amount of tax deducted would remotely come close to being the final liability.

On what grounds do you state that ?  There are many types of pension lump sums that dictate BR/BRX is the tax code to be used, it is just that the most common one with personal pensions is 1257X.

Because the Employers Guide to PAYE states that when a pension is accessed 'flexibly' (which seems to be the case here) then emergency code should be used. It may be that it wasn't accessed flexibly, but that was my assumptiom

Hendog

TheSpectator said:

Hendog said:

RogerPensionGuy said:

An interesting story here and very unwanted for the OP.

I have heard a fair few stories of people starting pension payments and they weren't and were not made aware of a few problem outcomes like paying the correct tax and not being aware of the MPAA.

Looking at the opening poster, I just see 400Kish. Take 100Kish Tax Free, 50Kish @ 20% Tax and 250Kish @ 40% Tax so Tax looks like 110Kish.

To the opening poster, did you think the Tax was correct when getting the money?

As your pension people said it was correct, I do wonder if they will come good or maybe meet you half way with the current Tax bill.

Hi yes I did think the tax was right as that’s what the pension company said. I thought I would have paid more that’s why I ask them. 

At the moment I have asked HMRC to investigated it as to why it was done on a BR code as I believe from what I have now researched and been told it should have been done as emergency taxed, and then the overpaid tax I should’ve been able to claim back.  I am waiting to see what HMRC come back with and then decide what to do. 

I’ve been told not to contact the pension company as HMRC should investigate it 1st and if the pension company are at fault HMRC deal with it. 

Would be very nice if they did offer to pay some off it if they are at fault but it also could be HMRC at fault or it could be all correct and I have to pay it.

How can HMRC be at fault if they hadn't issued a tax code? Technically the pension provider should have used the emergency tax code (personal allowance on a week/month 1 basis) and there are rare circumstances where an employer can be held liable for an under-deduction but if HMRC accept the error was made in good faith (and the prob will) then you need to start thinking now how you will repay the amount owing.

Personally I don't see how you could think that amount of tax deducted would remotely come close to being the final liability.

HMRC might have issued the tax code I don’t know yet who did that is why I have ask them to investigate it. 

As to payments I am waiting for them to get back to me about the code and what has happened. 

I have spoken to HMRC about paying the tax back which I can pay a lump sum off it off but not all off it. I also did a repayment plan with them what at 1st was ok but left me no spare money and would take years to pay back and they told me we need to at interest to it and the amount almost doubled and he said you would not be able to afford that. So he has take it to one off his managers. I am waiting to hear back from him. 

I thought the Tax would have been higher but the pension company told me it was correct when I raised it with them. They might not off know-in the tax code was wrong or the did not say there would be more tax to pay. 

Surely between HMRC and the pension company I should have paid the right amount off tax straight away. 

TheSpectator

Hendog said:

TheSpectator said:

Hendog said:

RogerPensionGuy said:

An interesting story here and very unwanted for the OP.

I have heard a fair few stories of people starting pension payments and they weren't and were not made aware of a few problem outcomes like paying the correct tax and not being aware of the MPAA.

Looking at the opening poster, I just see 400Kish. Take 100Kish Tax Free, 50Kish @ 20% Tax and 250Kish @ 40% Tax so Tax looks like 110Kish.

To the opening poster, did you think the Tax was correct when getting the money?

As your pension people said it was correct, I do wonder if they will come good or maybe meet you half way with the current Tax bill.

Hi yes I did think the tax was right as that’s what the pension company said. I thought I would have paid more that’s why I ask them. 

At the moment I have asked HMRC to investigated it as to why it was done on a BR code as I believe from what I have now researched and been told it should have been done as emergency taxed, and then the overpaid tax I should’ve been able to claim back.  I am waiting to see what HMRC come back with and then decide what to do. 

I’ve been told not to contact the pension company as HMRC should investigate it 1st and if the pension company are at fault HMRC deal with it. 

Would be very nice if they did offer to pay some off it if they are at fault but it also could be HMRC at fault or it could be all correct and I have to pay it.

How can HMRC be at fault if they hadn't issued a tax code? Technically the pension provider should have used the emergency tax code (personal allowance on a week/month 1 basis) and there are rare circumstances where an employer can be held liable for an under-deduction but if HMRC accept the error was made in good faith (and the prob will) then you need to start thinking now how you will repay the amount owing.

Personally I don't see how you could think that amount of tax deducted would remotely come close to being the final liability.

HMRC might have issued the tax code I don’t know yet who did that is why I have ask them to investigate it. 

As to payments I am waiting for them to get back to me about the code and what has happened. 

I have spoken to HMRC about paying the tax back which I can pay a lump sum off it off but not all off it. I also did a repayment plan with them what at 1st was ok but left me no spare money and would take years to pay back and they told me we need to at interest to it and the amount almost doubled and he said you would not be able to afford that. So he has take it to one off his managers. I am waiting to hear back from him. 

I thought the Tax would have been higher but the pension company told me it was correct when I raised it with them. They might not off know-in the tax code was wrong or the did not say there would be more tax to pay. 

Surely between HMRC and the pension company I should have paid the right amount off tax straight away. 

If it was your first taxable payment then HMRC wouldn't even know about the pension so couldn't have issued a tax code.

It's not the pension companys role to tell you there might be more tax due, it's your personal tax affairs and your responsibility. There are literally dozens of online calculators you could have used.

Cobbler_tone

TheSpectator said:

Hendog said:

RogerPensionGuy said:

An interesting story here and very unwanted for the OP.

I have heard a fair few stories of people starting pension payments and they weren't and were not made aware of a few problem outcomes like paying the correct tax and not being aware of the MPAA.

Looking at the opening poster, I just see 400Kish. Take 100Kish Tax Free, 50Kish @ 20% Tax and 250Kish @ 40% Tax so Tax looks like 110Kish.

To the opening poster, did you think the Tax was correct when getting the money?

As your pension people said it was correct, I do wonder if they will come good or maybe meet you half way with the current Tax bill.

Hi yes I did think the tax was right as that’s what the pension company said. I thought I would have paid more that’s why I ask them. 

At the moment I have asked HMRC to investigated it as to why it was done on a BR code as I believe from what I have now researched and been told it should have been done as emergency taxed, and then the overpaid tax I should’ve been able to claim back.  I am waiting to see what HMRC come back with and then decide what to do. 

I’ve been told not to contact the pension company as HMRC should investigate it 1st and if the pension company are at fault HMRC deal with it. 

Would be very nice if they did offer to pay some off it if they are at fault but it also could be HMRC at fault or it could be all correct and I have to pay it.

Personally I don't see how you could think that amount of tax deducted would remotely come close to being the final liability.

 Because some people don’t understand pensions and tax at all…many don’t question beyond their net pay. In fairness to the OP they questioned the pension company. Regardless of them saying it was correct (for the code) I can understand the confusion. At the same time very easy to point back to the OP seeking further advice when playing with big numbers, but in their world they asked the right questions.
Ultimately the OP will have to pick up the correct tab but an unfortunate and expensive life lesson for them, so wish them all the best.

Hoenir

Hendog said:

TheSpectator said:

Hendog said:

RogerPensionGuy said:

An interesting story here and very unwanted for the OP.

I have heard a fair few stories of people starting pension payments and they weren't and were not made aware of a few problem outcomes like paying the correct tax and not being aware of the MPAA.

Looking at the opening poster, I just see 400Kish. Take 100Kish Tax Free, 50Kish @ 20% Tax and 250Kish @ 40% Tax so Tax looks like 110Kish.

To the opening poster, did you think the Tax was correct when getting the money?

As your pension people said it was correct, I do wonder if they will come good or maybe meet you half way with the current Tax bill.

Hi yes I did think the tax was right as that’s what the pension company said. I thought I would have paid more that’s why I ask them. 

At the moment I have asked HMRC to investigated it as to why it was done on a BR code as I believe from what I have now researched and been told it should have been done as emergency taxed, and then the overpaid tax I should’ve been able to claim back.  I am waiting to see what HMRC come back with and then decide what to do. 

I’ve been told not to contact the pension company as HMRC should investigate it 1st and if the pension company are at fault HMRC deal with it. 

Would be very nice if they did offer to pay some off it if they are at fault but it also could be HMRC at fault or it could be all correct and I have to pay it.

How can HMRC be at fault if they hadn't issued a tax code? Technically the pension provider should have used the emergency tax code (personal allowance on a week/month 1 basis) and there are rare circumstances where an employer can be held liable for an under-deduction but if HMRC accept the error was made in good faith (and the prob will) then you need to start thinking now how you will repay the amount owing.

Personally I don't see how you could think that amount of tax deducted would remotely come close to being the final liability.

As to payments I am waiting for them to get back to me about the code and what has happened. 

I have spoken to HMRC about paying the tax back which I can pay a lump sum off it off but not all off it. I also did a repayment plan with them what at 1st was ok but left me no spare money and would take years to pay back and they told me we need to at interest to it and the amount almost doubled and he said you would not be able to afford that. So he has take it to one off his managers. I am waiting to hear back from him. 

Speak to a mortgage broker that specialises in Retirement Equity Release. 

There's zero chance of any of the tax being written off. Meanwhile interest wil accrue. Increasing the debt owed. 

Better to be proactive. 

Cobbler_tone

For the OP. I assume you still have income and didn’t spend everything on a house? I think your best bet is to negotiate with the HRMC with a payment plan, which may include remortgaging a bit of the property back.

Hendog

Hoenir said:

Hendog said:

TheSpectator said:

Hendog said:

RogerPensionGuy said:

An interesting story here and very unwanted for the OP.

I have heard a fair few stories of people starting pension payments and they weren't and were not made aware of a few problem outcomes like paying the correct tax and not being aware of the MPAA.

Looking at the opening poster, I just see 400Kish. Take 100Kish Tax Free, 50Kish @ 20% Tax and 250Kish @ 40% Tax so Tax looks like 110Kish.

To the opening poster, did you think the Tax was correct when getting the money?

As your pension people said it was correct, I do wonder if they will come good or maybe meet you half way with the current Tax bill.

Hi yes I did think the tax was right as that’s what the pension company said. I thought I would have paid more that’s why I ask them. 

At the moment I have asked HMRC to investigated it as to why it was done on a BR code as I believe from what I have now researched and been told it should have been done as emergency taxed, and then the overpaid tax I should’ve been able to claim back.  I am waiting to see what HMRC come back with and then decide what to do. 

I’ve been told not to contact the pension company as HMRC should investigate it 1st and if the pension company are at fault HMRC deal with it. 

Would be very nice if they did offer to pay some off it if they are at fault but it also could be HMRC at fault or it could be all correct and I have to pay it.

How can HMRC be at fault if they hadn't issued a tax code? Technically the pension provider should have used the emergency tax code (personal allowance on a week/month 1 basis) and there are rare circumstances where an employer can be held liable for an under-deduction but if HMRC accept the error was made in good faith (and the prob will) then you need to start thinking now how you will repay the amount owing.

Personally I don't see how you could think that amount of tax deducted would remotely come close to being the final liability.

As to payments I am waiting for them to get back to me about the code and what has happened. 

I have spoken to HMRC about paying the tax back which I can pay a lump sum off it off but not all off it. I also did a repayment plan with them what at 1st was ok but left me no spare money and would take years to pay back and they told me we need to at interest to it and the amount almost doubled and he said you would not be able to afford that. So he has take it to one off his managers. I am waiting to hear back from him. 

Speak to a mortgage broker that specialises in Retirement Equity Release. 

There's zero chance of any of the tax being written off. Meanwhile interest wil accrue. Increasing the debt owed. 

Better to be proactive. 

I have spoken to lots of Advice lines about this they have all said they have never heard of a BR code being used in this way and have all said let HMRC investigate it 1st. 

I only posted on here to find out if the BR code should have been used and that it was correct. 

I will look at all options to pay it back and hope HMRC supports me so I can with any Penalties

Hoenir

Hendog said:

Hoenir said:

Hendog said:

TheSpectator said:

Hendog said:

RogerPensionGuy said:

An interesting story here and very unwanted for the OP.

I have heard a fair few stories of people starting pension payments and they weren't and were not made aware of a few problem outcomes like paying the correct tax and not being aware of the MPAA.

Looking at the opening poster, I just see 400Kish. Take 100Kish Tax Free, 50Kish @ 20% Tax and 250Kish @ 40% Tax so Tax looks like 110Kish.

To the opening poster, did you think the Tax was correct when getting the money?

As your pension people said it was correct, I do wonder if they will come good or maybe meet you half way with the current Tax bill.

Hi yes I did think the tax was right as that’s what the pension company said. I thought I would have paid more that’s why I ask them. 

At the moment I have asked HMRC to investigated it as to why it was done on a BR code as I believe from what I have now researched and been told it should have been done as emergency taxed, and then the overpaid tax I should’ve been able to claim back.  I am waiting to see what HMRC come back with and then decide what to do. 

I’ve been told not to contact the pension company as HMRC should investigate it 1st and if the pension company are at fault HMRC deal with it. 

Would be very nice if they did offer to pay some off it if they are at fault but it also could be HMRC at fault or it could be all correct and I have to pay it.

How can HMRC be at fault if they hadn't issued a tax code? Technically the pension provider should have used the emergency tax code (personal allowance on a week/month 1 basis) and there are rare circumstances where an employer can be held liable for an under-deduction but if HMRC accept the error was made in good faith (and the prob will) then you need to start thinking now how you will repay the amount owing.

Personally I don't see how you could think that amount of tax deducted would remotely come close to being the final liability.

As to payments I am waiting for them to get back to me about the code and what has happened. 

I have spoken to HMRC about paying the tax back which I can pay a lump sum off it off but not all off it. I also did a repayment plan with them what at 1st was ok but left me no spare money and would take years to pay back and they told me we need to at interest to it and the amount almost doubled and he said you would not be able to afford that. So he has take it to one off his managers. I am waiting to hear back from him. 

Speak to a mortgage broker that specialises in Retirement Equity Release. 

There's zero chance of any of the tax being written off. Meanwhile interest wil accrue. Increasing the debt owed. 

Better to be proactive. 

I have spoken to lots of Advice lines about this they have all said they have never heard of a BR code being used in this way and have all said let HMRC investigate it 1st. 

I only posted on here to find out if the BR code should have been used and that it was correct. 

I will look at all options to pay it back and hope HMRC supports me so I can with any Penalties

Penalties and interest are two different matters. 

DRS1

Yes at the very least see how the interest rate on a re-mortgage would compare to the rate HMRC want to charge on their payment plan.

Dazed_and_C0nfused

In 2023 I withdrew a lump sum from my Pension.

I then took £278,000 out of which I paid £55,000 in tax. 

1st I took my 25% tax free approximately £97,000.

Given the above info from the op then the emergency tax code (1257L) would seem to be the one most likely to be appropriate to use.

But maybe there is some information missing?  Maybe the first payment included a small taxable amount which resulted in a BR code being issued 🤔