Month 1 emergency tax on pensions

dont_use_vistaprint

Is it true that this affects ALL ad-hoc withdrawals not just the very first one ? 

So the only way to avoid is setting up a regular monthly payment with the pension provider. Otherwise you’ll always be over taxed & claiming refunds.

Is there any way to instruct the provider to pay it gross and reconcile tax on your annual self assessment. 

Dazed_and_C0nfused

dont_use_vistaprint said:

Is it true that this affects ALL ad-hoc withdrawals not just the very first one ? 

So the only way to avoid is setting up a regular monthly payment with the pension provider. Otherwise you’ll always be over taxed & claiming refunds.

Is there any way to instruct the provider to pay it gross and reconcile tax on your annual self assessment. 

No it isn't true.

For the first payment the pension payer will use the tax code specified in HMRC's guidance.  Usually the emergency code (1257L at the moment) or BR.

After that the pension company will use either,
the tax code HMRC send them after the first payment or
continue with the tax code used on the first payment if no new tax code is issued for some reason

You can instruct the provider to pay it gross if you have a purchased life annuity, but only if you won't be liable to tax I think.  You need form R53 for that.  But not many people have purchased life annuities.

Marcon

dont_use_vistaprint said:

Is it true that this affects ALL ad-hoc withdrawals not just the very first one ? 

So the only way to avoid is setting up a regular monthly payment with the pension provider. Otherwise you’ll always be over taxed & claiming refunds.

Is there any way to instruct the provider to pay it gross and reconcile tax on your annual self assessment. 

Not for a 'normal' pension payable via the provider or scheme.

For more info on annuities and their tax treatment, see https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim75300#amount-subject-to-tax and read the section 'Amount subject to tax'.

Qyburn

dont_use_vistaprint said:

Is it true that this affects ALL ad-hoc withdrawals not just the very first one ? 

I've found that to be the case. First UFPLS last year was taxed on emergency M1 basis, this year HMRC issued a specific tax code to the provider, but still an M1 code.

squirrelpie

Qyburn said:

dont_use_vistaprint said:

Is it true that this affects ALL ad-hoc withdrawals not just the very first one ? 

I've found that to be the case. First UFPLS last year was taxed on emergency M1 basis, this year HMRC issued a specific tax code to the provider, but still an M1 code.

That sounds unusual. An emergency code was used with my first withdrawal (a UFPLS), but all subsequent UFPLS and drawdown payments have used the regular tax code issued to my provider after the first withdrawal. But in your case as well, it wasn't an emergency code after the first withdrawal.

Qyburn

squirrelpie said:

That sounds unusual. An emergency code was used with my first withdrawal (a UFPLS), but all subsequent UFPLS and drawdown payments have used the regular tax code issued to my provider after the first withdrawal. But in your case as well, it wasn't an emergency code after the first withdrawal.

This year's code is S639LX so as you say it's not the emergency code, but it's still month 1 so over-taxes a lump sum no matter which month it falls into.

Dazed_and_C0nfused

squirrelpie said:

Qyburn said:

dont_use_vistaprint said:

Is it true that this affects ALL ad-hoc withdrawals not just the very first one ? 

I've found that to be the case. First UFPLS last year was taxed on emergency M1 basis, this year HMRC issued a specific tax code to the provider, but still an M1 code.

That sounds unusual. An emergency code was used with my first withdrawal (a UFPLS), but all subsequent UFPLS and drawdown payments have used the regular tax code issued to my provider after the first withdrawal. But in your case as well, it wasn't an emergency code after the first withdrawal.

There can be a myriad of reasons why the code issued after the first payment remains the emergency code (1257L) but on a cumulative basis or a different code, say 1131N, is issued.

And the use of cumulative or non-cumulative codes also seems a bit odd at times, sometimes non-cumulative is used when there is no obvious reason why a cumulative code couldn't be used.

But how we see things from this side of the fence isn't necessarily how HMRC systems work!

molerat

They do seem to have a habit of issuing X codes in some circumstances but a phone call gets it removed if appropriate.

dont_use_vistaprint

Qyburn said:

dont_use_vistaprint said:

Is it true that this affects ALL ad-hoc withdrawals not just the very first one ? 

I've found that to be the case. First UFPLS last year was taxed on emergency M1 basis, this year HMRC issued a specific tax code to the provider, but still an M1 code.

This is exactly what I am finding when reading, that unless you set up a regular monthly payment, each ad hoc  withdrawal will be taxed on a month one basis.

Hoenir

dont_use_vistaprint said:

Qyburn said:

dont_use_vistaprint said:

Is it true that this affects ALL ad-hoc withdrawals not just the very first one ? 

I've found that to be the case. First UFPLS last year was taxed on emergency M1 basis, this year HMRC issued a specific tax code to the provider, but still an M1 code.

This is exactly what I am finding when reading, that unless you set up a regular monthly payment, each ad hoc  withdrawal will be taxed on a month one basis.

You can set-up a small regular withdrawl. While continuing to take ad-hoc amounts as well. That way you would minimise the self inflicted inconvenience. 

dont_use_vistaprint

Hoenir said:

dont_use_vistaprint said:

Qyburn said:

dont_use_vistaprint said:

Is it true that this affects ALL ad-hoc withdrawals not just the very first one ? 

I've found that to be the case. First UFPLS last year was taxed on emergency M1 basis, this year HMRC issued a specific tax code to the provider, but still an M1 code.

This is exactly what I am finding when reading, that unless you set up a regular monthly payment, each ad hoc  withdrawal will be taxed on a month one basis.

You can set-up a small regular withdrawl. While continuing to take ad-hoc amounts as well. That way you would minimise the self inflicted inconvenience. 

I don’t know if I can yet on my pension.

it’s not really self-inflicted. Is it , when HMRC use a method of taxation was designed for weekly /monthly salaries, on a savings system that was reformed so you can take money out how you like & switching off the other method called self assessment that would work far better.

Struggling to see how anyone could see that as self-inflicted