Tax collection with no taxable income

tigerspill

Hi,
I am not sure which is the best forum to post this question - but this is a place a visit regularly and know there are some very knowledgable people on here.

My wife has transferred her Married Allowance to me backdated to 2021/2022.  This is all pretty much now sorted.
However, in transferring the full 10% to me in 2021/2022, she now owes £190 in tax for that tax year following recalculation of her tax.  This is fine and OK as I received £252 plus interest.
The message she received from HMRC says  "we will be automatically collect the tax increasing the tax deducted from your wages, salary or pension, usually in equal instalments for 12 months from next April."
However, she will have no wages or salary.  But she will take money from her SIPP (has been paid to date in each tax year with no tax deducted).  
I can't get my head around how this is actually done - is it simply through a change in tax code?

Thanks for any help on this.

molerat

They will change the tax code allocated to the SIPP.

Dazed_and_C0nfused

tigerspill said:

Hi,
I am not sure which is the best forum to post this question - but this is a place a visit regularly and know there are some very knowledgable people on here.

My wife has transferred her Married Allowance to me backdated to 2021/2022.  This is all pretty much now sorted.
However, in transferring the full 10% to me in 2021/2022, she now owes £190 in tax for that tax year following recalculation of her tax.  This is fine and OK as I received £252 plus interest.
The message she received from HMRC says  "we will be automatically collect the tax increasing the tax deducted from your wages, salary or pension, usually in equal instalments for 12 months from next April."
However, she will have no wages or salary.  But she will take money from her SIPP (has been paid to date in each tax year with no tax deducted).  
I can't get my head around how this is actually done - is it simply through a change in tax code?

Thanks for any help on this.

Yes.  But HMRC will only collect the tax via her tax code if, when they come to calculate next years tax code, she is already expected to pay at least £190 in tax.  That is £190 before the tax owed is considered.

So how much income is she taking from her SIPP at the moment?  If that is only say £10k/year and she will remain not liable to tax then forget about a tax code change, they will eventually issue a Simple Assessment and she will have to pay the full £190 direct to HMRC (she has 3 months to pay from when the Simple Assessment calculation letter is issued).

I'm a bit lost by the reference to "no taxable income" though 🤔

tigerspill

Dazed_and_C0nfused said:

tigerspill said:

Hi,
I am not sure which is the best forum to post this question - but this is a place a visit regularly and know there are some very knowledgable people on here.

My wife has transferred her Married Allowance to me backdated to 2021/2022.  This is all pretty much now sorted.
However, in transferring the full 10% to me in 2021/2022, she now owes £190 in tax for that tax year following recalculation of her tax.  This is fine and OK as I received £252 plus interest.
The message she received from HMRC says  "we will be automatically collect the tax increasing the tax deducted from your wages, salary or pension, usually in equal instalments for 12 months from next April."
However, she will have no wages or salary.  But she will take money from her SIPP (has been paid to date in each tax year with no tax deducted).  
I can't get my head around how this is actually done - is it simply through a change in tax code?

Thanks for any help on this.

Yes.  But HMRC will only collect the tax via her tax code if, when they come to calculate next years tax code, she is already expected to pay at least £190 in tax.  That is £190 before the tax owed is considered.

So how much income is she taking from her SIPP at the moment?  If that is only say £10k/year and she will remain not liable to tax then forget about a tax code change, they will eventually issue a Simple Assessment and she will have to pay the full £190 direct to HMRC (she has 3 months to pay from when the Simple Assessment calculation letter is issued).

I'm a bit lost by the reference to "no taxable income" though 🤔

The plan is that she will empty her SIPP in 2025/26.  If I have calculated this and planned this correctly, This withdrawal will be below the level where she would be paying income tax. 
So I think what might happen is that her tax code will be reduced to cover this £190 owed - this will likely require to pay some tax on the SIPP withdrawal - but not enough.  She normally fills in a self assessment - and assuming she does so for 25/26 - I assume that this will show that she owe the remainder of this £190 that hasnt been collected via tax code.

PS - what I meant by no taxable income referring to no other income other than this SIPP and that that to date, she has kept withdrawals below the level where tax is due.

Dazed_and_C0nfused

tigerspill said:

Dazed_and_C0nfused said:

tigerspill said:

Hi,
I am not sure which is the best forum to post this question - but this is a place a visit regularly and know there are some very knowledgable people on here.

My wife has transferred her Married Allowance to me backdated to 2021/2022.  This is all pretty much now sorted.
However, in transferring the full 10% to me in 2021/2022, she now owes £190 in tax for that tax year following recalculation of her tax.  This is fine and OK as I received £252 plus interest.
The message she received from HMRC says  "we will be automatically collect the tax increasing the tax deducted from your wages, salary or pension, usually in equal instalments for 12 months from next April."
However, she will have no wages or salary.  But she will take money from her SIPP (has been paid to date in each tax year with no tax deducted).  
I can't get my head around how this is actually done - is it simply through a change in tax code?

Thanks for any help on this.

Yes.  But HMRC will only collect the tax via her tax code if, when they come to calculate next years tax code, she is already expected to pay at least £190 in tax.  That is £190 before the tax owed is considered.

So how much income is she taking from her SIPP at the moment?  If that is only say £10k/year and she will remain not liable to tax then forget about a tax code change, they will eventually issue a Simple Assessment and she will have to pay the full £190 direct to HMRC (she has 3 months to pay from when the Simple Assessment calculation letter is issued).

I'm a bit lost by the reference to "no taxable income" though 🤔

The plan is that she will empty her SIPP in 2025/26.  If I have calculated this and planned this correctly, This withdrawal will be below the level where she would be paying income tax. 
So I think what might happen is that her tax code will be reduced to cover this £190 owed - this will likely require to pay some tax on the SIPP withdrawal - but not enough.  She normally fills in a self assessment - and assuming she does so for 25/26 - I assume that this will show that she owe the remainder of this £190 that hasnt been collected via tax code.

PS - what I meant by no taxable income referring to no other income other than this SIPP and that that to date, she has kept withdrawals below the level where tax is due.

If she normally completes a tax return (why 🤔) then I don't understand how she has received this message?

The message she received from HMRC says "we will be automatically collect the tax increasing the tax deducted from your wages, salary or pension, usually in equal instalments for 12 months from next April."

The usual outcome for 2021-22 would be HMRC have to issue an assessment as the time limit for amending her tax return has passed. And the result of that assessment is always that the tax has to be paid direct to HMRC via her Self Assessment account.

tigerspill

She does fill in an SA each year - possibly since previously she had to complete the Land/Property and Foreign pages.  TBH, I am happy with this as it allows us a good and accurate of tax position each year.
I am not sure of the workings of HMRC, but that message was a direct copy and paste from the message on her SA account.   And the "current position" on her SA tax account is £0.

Dazed_and_C0nfused

tigerspill said:

She does fill in an SA each year - possibly since previously she had to complete the Land/Property and Foreign pages.  TBH, I am happy with this as it allows us a good and accurate of tax position each year.
I am not sure of the workings of HMRC, but that message was a direct copy and paste from the message on her SA account.   And the "current position" on her SA tax account is £0.

That's a new one on me then.  I cannot see how a revised Self Assessment liability for 2021-22 can possibly be considered for inclusion in a tax code but you can only go by the information HMRC have provided.

I would be very surprised if that £190 was included in her 2025-26 tax code though.