Withdraw lump sum from Pension BR tax code.

TheSpectator

Hendog said:

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. 

To be honest, the how and why is now academic. It's now your debt.

Dazed_and_C0nfused

And making (and keeping to) a payment arrangement with HMRC would almost certainly be a cost saving exercise as that can avoid imposition of a late payment penalty.

QrizB

Dazed_and_C0nfused said:

And making (and keeping to) a payment arrangement with HMRC would almost certainly be a cost saving exercise as that can avoid imposition of a late payment penalty.

Although HMRC's interest rate looks to be higher than current mortgage rates, so it could be cheapter to obtain a mortgage and repay HMRC in full rather than continue with a payment arrangement to completion?
https://www.gov.uk/government/publications/rates-and-allowances-hmrc-interest-rates-for-late-and-early-payments/rates-and-allowances-hmrc-interest-rates

Dazed_and_C0nfused

QrizB said:

Dazed_and_C0nfused said:

And making (and keeping to) a payment arrangement with HMRC would almost certainly be a cost saving exercise as that can avoid imposition of a late payment penalty.

Although HMRC's interest rate looks to be higher than current mortgage rates, so it could be cheapter to obtain a mortgage and repay HMRC in full rather than continue with a payment arrangement to completion?
https://www.gov.uk/government/publications/rates-and-allowances-hmrc-interest-rates-for-late-and-early-payments/rates-and-allowances-hmrc-interest-rates

Good point!

german_keeper

Hendog said:

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. 

I might be missing something here but presumably the amounts requested from the pension were calculated to cover the cost of the property. So when the tax deducted was much less than expected there should have been a large chunk of money left after the purchase of said property. What has happened to that money?

Hendog

german_keeper said:

Hendog said:

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. 

I might be missing something here but presumably the amounts requested from the pension were calculated to cover the cost of the property. So when the tax deducted was much less than expected there should have been a large chunk of money left after the purchase of said property. What has happened to that money?

hi. I do still have some off the money so can pay a chunk of the money off but it’s not about the money.
I am trying to find out if a BR tax code should of be used when I withdrew the money 

MallyGirl

Whichever code should have been used, your tax liability remains unchanged so you were always going to be hit by this much tax for a withdrawal of this amount

BikingBud

On a slightly different tack and perhaps to provide clarity for other site members, @Hendog what made you decide to drawdown so much to purchase the house?

Did you determine it was the most cost effective route?

What else did you consider?

What might a mortgage have cost if you optimised the pension drawdown to pay minimal tax on the cash withdrawal over a number of years?

eg TFLS + £275k over 7 years = £39.3k taxed at a lower rate (net maybe £33.9k) with mortgage to pay over maybe 8 years @~4%

I have great empathy with your situation but I feel there are points here where advice from very competent contributors would have enabled you to achieve a far better outcome. Perhaps sharing the basis for some of your decisions would assist and prevent others arriving at the same point.

Thanks

Hendog

BikingBud said:

On a slightly different tack and perhaps to provide clarity for other site members, @Hendog what made you decide to drawdown so much to purchase the house?

Did you determine it was the most cost effective route?

What else did you consider?

What might a mortgage have cost if you optimised the pension drawdown to pay minimal tax on the cash withdrawal over a number of years?

eg TFLS + £275k over 7 years = £39.3k taxed at a lower rate (net maybe £33.9k) with mortgage to pay over maybe 8 years @~4%

I have great empathy with your situation but I feel there are points here where advice from very competent contributors would have enabled you to achieve a far better outcome. Perhaps sharing the basis for some of your decisions would assist and prevent others arriving at the same point.

Thanks

long story but I will keep it short 

I was living in rented with no savings apart from my pension what was £380000 or £10,000 a year when I retired if I retired at 55. 

It was a final salary pension. 

My rent was £14,000 a year.
So say I lived to 80 my rent would have cost me from the age of 55  25 years x £14000 = £350000 most probably more as rent would have gone up. 

If I had the £10,000 a year 25 x £10000 would have been £25000O 

The 10,000 a year would never had gone up but the house value would go up and quite a bit over the years.
Plus the security that I have no rent or mortgage to pay now, hopefully for the rest of my life and the security, it gives my wife, it was the best option for me. 

Plus thinking of my kids it gives them money from the house when I die. 

At some point when I want to down size as I get older I will sell the house for say £300000 and buy something for say £200000 what will give me £100000 for my later years.

I only ever paid £15,000 my self into this pension. 

The pension was a final salary pension they called it the Gold plated, Pension lots of company stop them as they couldn’t afford to pay out. 

I was lucky 

The biggest rip off was that by law you have to get a A financial advisor with a certain qualification for you to agree to cash your pension in, and that cost £10,000. 

I never met or talked to the advisor, who did it? It was all done through his secretaries.
I would love to be able to claim that money back as know matter what they said I was going to do it anyway but you have to go through one. Whether he said yes, or no, I could’ve still gone ahead of it. 

Hendog

MallyGirl said:

Whichever code should have been used, your tax liability remains unchanged so you were always going to be hit by this much tax for a withdrawal of this amount

HMCA got back to me today and said it was caused by a technical issue. They would not give me any more details than that. 

They have said I need to raise it with my pension provider as it’s their responsibility to ensure that all I tax was paid before releasing the money. 

So I am in the Process of writing a letter to my pension provider, to ask them to investigate it