HMRC taxing pension

nicisaskinflint

Hi all
I was wondering if anyone can advise me as to why my pension provider deducts tax at source for HMRC from my small withdrawals, which I then don't get back for a whole year after I've completed my self assessment. I have no other income and my withdrawls have always been less than my personal allowance of £12750. How do they have the right to the interest earned when It will always be my money?
Thanks

DRS1

You are probably taking too  much in one go.  Try spreading it evenly over the year.

Sarahspangles

nicisaskinflint said:

Hi all
I was wondering if anyone can advise me as to why my pension provider deducts tax at source for HMRC from my small withdrawals, which I then don't get back for a whole year after I've completed my self assessment. I have no other income and my withdrawls have always been less than my personal allowance of £12750. How do they have the right to the interest earned when It will always be my money?
Thanks

Does the provider use PAYE and what does your notice of coding tell them to do?

You mention self-assessment- what requires you to complete this?

molerat

What tax code are they using ?  If you are making withdrawals early on in the year that is how PAYE will work and will correct itself if you make a withdrawal in March, they are not going to change the tax system to suit you.

badmemory

1) Can you request that the self assessment stops.  (They may want to do simple assessment instead.)  

2) Ask them to send the pension co your tax code. 

Then figure out how much a month you can take without paying tax, then work it out cumulatively & don't go over that but If they have the correct tax code it should be refunded the next time you take some within the same tax year.

squirrelpie

nicisaskinflint said:

How do they have the right to the interest earned when It will always be my money?
Thanks

Write to your MP and complain.

green_man

Are these UFPLS withdrawals?  If so you don’t have to wait until you do a self assessment to get your refund, you can fill in a P55 and get a refund in around a month

https://www.gov.uk/guidance/claim-back-tax-on-a-flexibly-accessed-pension-overpayment-p55

Qyburn

nicisaskinflint said:

Hi all
I was wondering if anyone can advise me as to why my pension provider deducts tax at source for HMRC from my small withdrawals, which I then don't get back for a whole year after I've completed my self assessment. I have no other income and my withdrawls have always been less than my personal allowance of £12750. How do they have the right to the interest earned when It will always be my money?
Thanks

You can claim back the tax overpayment straightaway, in my case it's been refunded within three to four weeks. 

I'm puzzled by your "whole year after I've completed my self assessment" comment though. Last time I did so I submitted my tax return in April and received the refund in early May. It's not HMRC's fault if you delay submitting your return.

badmemory

Qyburn said:

nicisaskinflint said:

Hi all
I was wondering if anyone can advise me as to why my pension provider deducts tax at source for HMRC from my small withdrawals, which I then don't get back for a whole year after I've completed my self assessment. I have no other income and my withdrawls have always been less than my personal allowance of £12750. How do they have the right to the interest earned when It will always be my money?
Thanks

You can claim back the tax overpayment straightaway, in my case it's been refunded within three to four weeks. 

I'm puzzled by your "whole year after I've completed my self assessment" comment though. Last time I did so I submitted my tax return in April and received the refund in early May. It's not HMRC's fault if you delay submitting your return.

Unfortunately they are now running so far behind that they have barely made it before the end of the next tax year.  They insist on doing mine by simple assessment which every previous year has been during July.  This year when I hadn't received it by January I rang them for the third time chasing it & finally got a proper answer & it is now not payable until mid April.  Basically they appear to be swamped.

I admit that I'm alright Jack.  But I do worry about pensioners that have not had to pay tax since they retired, instead of getting a simple assessment in July giving them 6 months to figure it out, are going to get a very late request for payment with only 3 months & then the thought of another in the not too distant future when funds are even tighter still.

Dazed_and_C0nfused

nicisaskinflint said:

Hi all
I was wondering if anyone can advise me as to why my pension provider deducts tax at source for HMRC from my small withdrawals, which I then don't get back for a whole year after I've completed my self assessment. I have no other income and my withdrawls have always been less than my personal allowance of £12750. How do they have the right to the interest earned when It will always be my money?
Thanks

Resolving this is something you can sort yourself.

If this pension is your only source of PAYE income then why not simply ask HMRC to allocate your tax code allowances to the pension you are taking these small withdrawals from?

Once they have a new tax code the pension company will, subject to the actual code and taxable pension payments you take, stop deducting tax.

nicisaskinflint

OK thanks for this everyone.
I realise from Qyburn that it is because I never submit my tax return until Jan the following year. You're right, if I submitted it earlier I'd get it back earlier.
FYI my tax code is 1256L and I have never withdrawn more than £12,000 in any one tax year.
Many thanks.