Withdraw lump sum from Pension BR tax code.

Hendog

Dazed_and_C0nfused said:

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 🤔

It was the 1st time I took any money out apart from my tax free amount. 

Hopefully I find out when they investigate it. 

DRS1

Dazed_and_C0nfused said:

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 🤔

The OP was also getting a salary.  Could that have something to do with it?  EG not getting the personal allowance twice via two tax codes?

But why use BR and not a D1 or D0 code?  Or do they have to be issued by HMRC?

Hoenir

Hendog said:

Dazed_and_C0nfused said:

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 🤔

It was the 1st time I took any money out apart from my tax free amount. 

Hopefully I find out when they investigate it. 

Mistakes happen. Whoever was at fault will be duly reprimanded. 

Dazed_and_C0nfused

DRS1 said:

Dazed_and_C0nfused said:

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 🤔

The OP was also getting a salary.  Could that have something to do with it?  EG not getting the personal allowance twice via two tax codes?

But why use BR and not a D1 or D0 code?  Or do they have to be issued by HMRC?

I don't think there is ever a situation where the code used on the first payment would be D1 or D0, even if the taxpayer and pension company knew that would be the best outcome.

dunstonh

It was the 1st time I took any money out apart from my tax free amount. 

If you use the HMRC payroll flow chart process:



The outcome is:

Dazed_and_C0nfused

dunstonh said:

It was the 1st time I took any money out apart from my tax free amount. 

If you use the HMRC payroll flow chart process:



The outcome is:

But the op isn't an employee, they were taking pension income.

So the guidance in CWG2 would apply, not the new starter process.

Smudgeismydog

OP stated;

“My wages for the year was £12,500”

This suggests they were an employee, and also stated accessing the tax free cash was the first time they had taken money from their pension.

Dazed_and_C0nfused

Smudgeismydog said:

OP stated;

“My wages for the year was £12,500”

This suggests they were an employee, and also stated accessing the tax free cash was the first time they had taken money from their pension.

Maybe they provided the pension company with a P45 😳

If so this is the guidance provided to the pension payer for that situation,

2.2.4 Procedures for other pension and annuity payers

Most pensions and annuities from, or in respect of, a registered pension scheme are PAYE pension income. Where the pension or annuity is for a dependant, nominee or successor, they may be exempt from tax. Read paragraph 2.2.7.

Pension recipient gives you form P45

When a pension recipient gives you a form P45:

set up a new payroll record for them

include the date the pension started with the first pension payment

indicate ‘Yes’ in the occupational pension indicator field on the first and every payment of pension

include the annual amount of the occupational pension with the first pension payment, do not pro rata it from the start date

include the tax code

include the payroll ID, if you want to use one

use the code from the P45 on a week 1 or month 1 basis until you hear from us

if we have not contacted you by 5 April (or the first pension payment is to be made after 5 April), carry forward the existing code to the new tax year but use it on a cumulative basis

after the pension or annuity has started and after you have received a code from us you must destroy the P45

Hendog

Dazed_and_C0nfused said:

Smudgeismydog said:

OP stated;

“My wages for the year was £12,500”

This suggests they were an employee, and also stated accessing the tax free cash was the first time they had taken money from their pension.

Maybe they provided the pension company with a P45 😳

If so this is the guidance provided to the pension payer for that situation,

2.2.4 Procedures for other pension and annuity payers

Most pensions and annuities from, or in respect of, a registered pension scheme are PAYE pension income. Where the pension or annuity is for a dependant, nominee or successor, they may be exempt from tax. Read paragraph 2.2.7.

Pension recipient gives you form P45

When a pension recipient gives you a form P45:

set up a new payroll record for them

include the date the pension started with the first pension payment

indicate ‘Yes’ in the occupational pension indicator field on the first and every payment of pension

include the annual amount of the occupational pension with the first pension payment, do not pro rata it from the start date

include the tax code

include the payroll ID, if you want to use one

use the code from the P45 on a week 1 or month 1 basis until you hear from us

if we have not contacted you by 5 April (or the first pension payment is to be made after 5 April), carry forward the existing code to the new tax year but use it on a cumulative basis

after the pension or annuity has started and after you have received a code from us you must destroy the P45

hi, No I never gave the Pension company anything. No p45
I left it all for them to do 

Hendog

Hoenir said:

Hendog said:

Hoenir said:

Hendog said:

I am trying to sort the under payment out that’s why I have posted on here. 

What I am asking is should off a BR tax code been used by either my pension company or HMRC on withdrawing the lump sum as all I can find is that it should’ve been done as emergency tax 

In performing the transaction you presumably were aware of the tax implications. When the amount you received was higher than you were expecting. Didn't you think to query it.  

I did query it and my pension company said it was right. I did not query the tax code as I know nothing about tax codes. 

I was referring to the decision process before effecting the withdrawl. Surely you performed the sums to determine the net amount you'd receive. Factoring in any other taxable income you'd receive during the year. The PAYE system itself has been in place for many decades. 

I did use some online calculators but get getting different results. 

I know now I missed a couple of bits like did not allow that I would lose my allowance.
I was expecting to pay around £89,000 and when they said it was £55,000 I just thought I got it wrong. 

It’s not so much about the money it’s more about why did they put me on a BR tax code and not emergency tax? 

If they got it right in the 1st place I would not owe tax now.