Self Assessment Help Please - re. pension

sioux65

Hope someone can advise. I have to complete a self assessment for the first time ever as I'm getting my workplace pension on ill health grounds now.

I was made redundant on health grounds in 2009. I didn't realise I could apply to have my pension back then, and only applied for it in 2023.

My former employer agreed that I should have access to my pension, and backdated to 2009 - so I received my lump sum payment plus a separate sum for the backdated years.

Now that I'm completing the self assessment form, it looks like I'm going to be taxed a huge amount on the total received in 2023 with no account taken of the fact that I should have received it annually over previous years.

I hope what I've said makes sense! Can anyone tell me what to do and/or if this sounds like what should happen??

Thank you.

zagfles

AIUI I think the general rule is if you were contractually entitled to the pension in previous years and they didn't pay it, then it counts as taxable income in those years, but if it's discretionary then it counts when it's paid. 

You're probably best explaining the exact circumstances to HMRC. You've left it very late if it's for the 2023/24 tax year, I was going to suggest writing to them but probably too late for that. 

sioux65

zagfles said:

AIUI I think the general rule is if you were contractually entitled to the pension in previous years and they didn't pay it, then it counts as taxable income in those years, but if it's discretionary then it counts when it's paid. 

You're probably best explaining the exact circumstances to HMRC. You've left it very late if it's for the 2023/24 tax year, I was going to suggest writing to them but probably too late for that. 

Thanks very much for your reply. Yes, I'm afraid it is for 23/24 - I had no idea it was going to be complicated, as I say this is my first experience of self assessment.... clearly a rookie mistake thinking it would be straightforward! Thanks again.

Voyager2002

zagfles said:

AIUI I think the general rule is if you were contractually entitled to the pension in previous years and they didn't pay it, then it counts as taxable income in those years, but if it's discretionary then it counts when it's paid. 

You're probably best explaining the exact circumstances to HMRC. You've left it very late if it's for the 2023/24 tax year, I was going to suggest writing to them but probably too late for that. 

Interesting... I was contractually entitled to my pension during one tax year, but poor communication by the provider meant that they didn't start paying it until well into the following year. So I received a lot in one go, and HMRC said that it all had to be taxed as income during the tax year when it was paid. (I had unused allowances from the previous year, and they were wasted.)

The lump sum is normally free of tax.

uknick

Section 16 of ITEPA 2003 relates to the tax rules for amounts relating to different tax years.  They state; 

16 Meaning of earnings “for” a tax year(1)This section applies for determining whether general earnings are general earnings “for” a particular tax year for the purposes of this Chapter.
(2)General earnings that are earned in, or otherwise in respect of, a particular period are to be regarded as general earnings for that period.
(3)If that period consists of the whole or part of a single tax year, the earnings are to be regarded as general earnings “for” that tax year.
(4)If that period consists of the whole or parts of two or more tax years, the part of the earnings that is to be regarded as general earnings “for” each of those tax years is to be determined on a just and reasonable apportionment.
(5)This section does not apply to any amount which is required by a provision of Part 3 to be treated as earnings for a particular tax year.

My partner used these rules to apportion an employment tribunal award which included loss of earnings across the relevant tax years.  Her employer deducted full tax at time of payment of the award and she had to claim it back.  As said above, if your pension under ill health terms SHOULD have been paid I think you could use these rules to apportion the lump sum. 

Having said that, my partner wasn't required to do self assessment and dealt with the matter by way of letter.  If you've been asked to do a self assessment by HMRC you might need to do the return to avoid fines and interest and then make a claim to get any overpaid tax back by way of letter.  The letter she sent included a table detailing the tax computations for the years in question so HMRC could easily see what had been overpaid. 

  

sioux65

uknick said:

Section 16 of ITEPA 2003 relates to the tax rules for amounts relating to different tax years.  They state; 

16 Meaning of earnings “for” a tax year

(1)This section applies for determining whether general earnings are general earnings “for” a particular tax year for the purposes of this Chapter.

(2)General earnings that are earned in, or otherwise in respect of, a particular period are to be regarded as general earnings for that period.

(3)If that period consists of the whole or part of a single tax year, the earnings are to be regarded as general earnings “for” that tax year.

(4)If that period consists of the whole or parts of two or more tax years, the part of the earnings that is to be regarded as general earnings “for” each of those tax years is to be determined on a just and reasonable apportionment.

(5)This section does not apply to any amount which is required by a provision of Part 3 to be treated as earnings for a particular tax year.

My partner used these rules to apportion an employment tribunal award which included loss of earnings across the relevant tax years.  Her employer deducted full tax at time of payment of the award and she had to claim it back.  As said above, if your pension under ill health terms SHOULD have been paid I think you could use these rules to apportion the lump sum. 

Having said that, my partner wasn't required to do self assessment and dealt with the matter by way of letter.  If you've been asked to do a self assessment by HMRC you might need to do the return to avoid fines and interest and then make a claim to get any overpaid tax back by way of letter.  The letter she sent included a table detailing the tax computations for the years in question so HMRC could easily see what had been overpaid. 

  

That’s really helpful, thank you very much for replying.

mybestattempt

uknick said:

Section 16 of ITEPA 2003 relates to the tax rules for amounts relating to different tax years.  They state; 

16 Meaning of earnings “for” a tax year

(1)This section applies for determining whether general earnings are general earnings “for” a particular tax year for the purposes of this Chapter.

(2)General earnings that are earned in, or otherwise in respect of, a particular period are to be regarded as general earnings for that period.

(3)If that period consists of the whole or part of a single tax year, the earnings are to be regarded as general earnings “for” that tax year.

(4)If that period consists of the whole or parts of two or more tax years, the part of the earnings that is to be regarded as general earnings “for” each of those tax years is to be determined on a just and reasonable apportionment.

(5)This section does not apply to any amount which is required by a provision of Part 3 to be treated as earnings for a particular tax year.

My partner used these rules to apportion an employment tribunal award which included loss of earnings across the relevant tax years.  Her employer deducted full tax at time of payment of the award and she had to claim it back.  As said above, if your pension under ill health terms SHOULD have been paid I think you could use these rules to apportion the lump sum. 

Having said that, my partner wasn't required to do self assessment and dealt with the matter by way of letter.  If you've been asked to do a self assessment by HMRC you might need to do the return to avoid fines and interest and then make a claim to get any overpaid tax back by way of letter.  The letter she sent included a table detailing the tax computations for the years in question so HMRC could easily see what had been overpaid. 



 

@uknick the legislation at Section 16 ITEPA 2003 only applies to earnings.

The legislation for UK pensions starts at  Section 569 of ITEPA 2003.

The HMRC guidance is here :

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim75020

@sioux65 you should include only the pension due for 2023/24 on your self assessment for that year.

However, you will need to provide HMRC with a breakdown of arrears relating to earlier tax years so those years can be reviewed. 

uknick

mybestattempt said:

uknick said:

Section 16 of ITEPA 2003 relates to the tax rules for amounts relating to different tax years.  They state; 

16 Meaning of earnings “for” a tax year

(1)This section applies for determining whether general earnings are general earnings “for” a particular tax year for the purposes of this Chapter.

(2)General earnings that are earned in, or otherwise in respect of, a particular period are to be regarded as general earnings for that period.

(3)If that period consists of the whole or part of a single tax year, the earnings are to be regarded as general earnings “for” that tax year.

(4)If that period consists of the whole or parts of two or more tax years, the part of the earnings that is to be regarded as general earnings “for” each of those tax years is to be determined on a just and reasonable apportionment.

(5)This section does not apply to any amount which is required by a provision of Part 3 to be treated as earnings for a particular tax year.

My partner used these rules to apportion an employment tribunal award which included loss of earnings across the relevant tax years.  Her employer deducted full tax at time of payment of the award and she had to claim it back.  As said above, if your pension under ill health terms SHOULD have been paid I think you could use these rules to apportion the lump sum. 

Having said that, my partner wasn't required to do self assessment and dealt with the matter by way of letter.  If you've been asked to do a self assessment by HMRC you might need to do the return to avoid fines and interest and then make a claim to get any overpaid tax back by way of letter.  The letter she sent included a table detailing the tax computations for the years in question so HMRC could easily see what had been overpaid. 



 

@uknick the legislation at Section 16 ITEPA 2003 only applies to earnings.

The legislation for UK pensions starts at  Section 569 of ITEPA 2003.

The HMRC guidance is here :

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim75020

@sioux65 you should include only the pension due for 2023/24 on your self assessment for that year.

However, you will need to provide HMRC with a breakdown of arrears relating to earlier tax years so those years can be reviewed. 

@mybestattempt thanks for clarifying that.

sioux65

@mybestattempt thank you so much for that 👍