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My Latest P55 Claim Issues

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Neversurrender
Neversurrender Posts: 103 Forumite
Second Anniversary 10 Posts Name Dropper
edited 23 April at 2:52PM in Cutting tax
Hi
Recently I completed a P55 as I do at this time every year, in order to claim back the overpaid tax taken when I flexibly drawdown from my private Sipp pension as a lump sum.
I always make sure I stay below my tax threshold, to avoid paying Tax.

My drawdown, together with my other private pension, is total of £13,500
My allowance is £12,570 + Married allowance of £,1260 = £13,830

So you can see I've stayed below my personal threshold.

Now here's  the reason I am posting.

On completing the P55 it asked for a total of untaxed savings interest, so of course an assumption has to be made of what you expect to earn over this current tax year, in taxable interest.
I was able to state £963

So here's the bit I can't get my head around.
HMRC have deducted £963 from my total personal allowance of £13,830 and left me with an allowance of £12,894

This cant be right because I have my £1000 + £5000 minus my married allowance of £1,260 making £4,740 for interest I can earn on savings before paying Tax.

So why did they take it off my taxable income?

So what if I wanted to receive further income in this tax year, I would have to pay more tax because my untaxed savings interest has chewed up some of my tax allowance.

Any advice much appreciated 
Thanks
«1

Comments

  • Nomunnofun1
    Nomunnofun1 Posts: 673 Forumite
    500 Posts Name Dropper
    You have a misunderstanding of how married allowance works. It is not an additional allowance which is added to your normal personal allowance when it comes to calculating your tax liability - it is a tax credit worth up to £252. 

    However, for tax code purposes ONLY £1260 is added to obtain this relief (£1260 at 20% is £252.)

    Calculate your tax liability using your normal personal allowance and deduct £252 from the result. 
  • Neversurrender
    Neversurrender Posts: 103 Forumite
    Second Anniversary 10 Posts Name Dropper
    edited 23 April at 5:58PM
    You have a misunderstanding of how married allowance works. It is not an additional allowance which is added to your normal personal allowance when it comes to calculating your tax liability - it is a tax credit worth up to £252. 

    However, for tax code purposes ONLY £1260 is added to obtain this relief (£1260 at 20% is £252.)

    Calculate your tax liability using your normal personal allowance and deduct £252 from the result. 
    Thanks but the married allowance is a side issue
    Even if we were to assume I didn't have the married allowance, the situation would be no different, would it?
    The whole crux of my question is
    Why did they take my taxable interest of my basic allowance, which has now reduced it, this cant be right if I have £1000 plus £5000 as an allowance for taxable savings interest.

    I only mentioned married allowance for full disclosure

  • TheSpectator
    TheSpectator Posts: 862 Forumite
    500 Posts Name Dropper
    What exactly have you received - I  suspect a coding notice which will have no bearing on the tax calculation that you will receive as a result of sending the P55.
  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 17,557 Forumite
    10,000 Posts Fifth Anniversary Name Dropper
    Hi
    Recently I completed a P55 as I do at this time every year, in order to claim back the overpaid tax taken when I flexibly drawdown from my private Sipp pension as a lump sum.
    I always make sure I stay below my tax threshold, to avoid paying Tax.

    My drawdown, together with my other private pension, is total of £13,500
    My allowance is £12,570 + Married allowance of £,1260 = £13,830

    So you can see I've stayed below my personal threshold.

    Now here's  the reason I am posting.

    On completing the P55 it asked for a total of untaxed savings interest, so of course an assumption has to be made of what you expect to earn over this current tax year, in taxable interest.
    I was able to state £963

    So here's the bit I can't get my head around.
    HMRC have deducted £963 from my total personal allowance of £13,830 and left me with an allowance of £12,894

    This cant be right because I have my £1000 + £5000 minus my married allowance of £1,260 making £4,740 for interest I can earn on savings before paying Tax.

    So why did they take it off my taxable income?

    So what if I wanted to receive further income in this tax year, I would have to pay more tax because my untaxed savings interest has chewed up some of my tax allowance.

    Any advice much appreciated 
    Thanks
    If this is an updated tax code and you have taken the one and only pension payment for this tax year then I'm at a loss as to what you think the issue is?

    Who is going to use this tax code if you aren't taking more money out of the pension in this tax year?

    Also, you cannot have a Personal Allowance greater than £12,570.  Marriage Allowance entitles you to a tax reduction, not extra Personal Allowance.
  • Neversurrender
    Neversurrender Posts: 103 Forumite
    Second Anniversary 10 Posts Name Dropper
    edited 23 April at 7:33PM
    Hi
    Recently I completed a P55 as I do at this time every year, in order to claim back the overpaid tax taken when I flexibly drawdown from my private Sipp pension as a lump sum.
    I always make sure I stay below my tax threshold, to avoid paying Tax.

    My drawdown, together with my other private pension, is total of £13,500
    My allowance is £12,570 + Married allowance of £,1260 = £13,830

    So you can see I've stayed below my personal threshold.

    Now here's  the reason I am posting.

    On completing the P55 it asked for a total of untaxed savings interest, so of course an assumption has to be made of what you expect to earn over this current tax year, in taxable interest.
    I was able to state £963

    So here's the bit I can't get my head around.
    HMRC have deducted £963 from my total personal allowance of £13,830 and left me with an allowance of £12,894

    This cant be right because I have my £1000 + £5000 minus my married allowance of £1,260 making £4,740 for interest I can earn on savings before paying Tax.

    So why did they take it off my taxable income?

    So what if I wanted to receive further income in this tax year, I would have to pay more tax because my untaxed savings interest has chewed up some of my tax allowance.

    Any advice much appreciated 
    Thanks
    If this is an updated tax code and you have taken the one and only pension payment for this tax year then I'm at a loss as to what you think the issue is?

    Who is going to use this tax code if you aren't taking more money out of the pension in this tax year?

    Also, you cannot have a Personal Allowance greater than £12,570.  Marriage Allowance entitles you to a tax reduction, not extra Personal Allowance.


    What I can't understand is why are they knocking the savings interest off my personal allowance in the first place, regardless of if I get married allowance or not I still have at least £5000 as an additional allowance for that savings interest
    So who knows maybe I would look for more income in this tax year, then what would I do??
    HMRC have stuck my savings interest onto my normal allowance meaning I will be put into tax earlier
  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 17,557 Forumite
    10,000 Posts Fifth Anniversary Name Dropper
    Hi
    Recently I completed a P55 as I do at this time every year, in order to claim back the overpaid tax taken when I flexibly drawdown from my private Sipp pension as a lump sum.
    I always make sure I stay below my tax threshold, to avoid paying Tax.

    My drawdown, together with my other private pension, is total of £13,500
    My allowance is £12,570 + Married allowance of £,1260 = £13,830

    So you can see I've stayed below my personal threshold.

    Now here's  the reason I am posting.

    On completing the P55 it asked for a total of untaxed savings interest, so of course an assumption has to be made of what you expect to earn over this current tax year, in taxable interest.
    I was able to state £963

    So here's the bit I can't get my head around.
    HMRC have deducted £963 from my total personal allowance of £13,830 and left me with an allowance of £12,894

    This cant be right because I have my £1000 + £5000 minus my married allowance of £1,260 making £4,740 for interest I can earn on savings before paying Tax.

    So why did they take it off my taxable income?

    So what if I wanted to receive further income in this tax year, I would have to pay more tax because my untaxed savings interest has chewed up some of my tax allowance.

    Any advice much appreciated 
    Thanks
    If this is an updated tax code and you have taken the one and only pension payment for this tax year then I'm at a loss as to what you think the issue is?

    Who is going to use this tax code if you aren't taking more money out of the pension in this tax year?

    Also, you cannot have a Personal Allowance greater than £12,570.  Marriage Allowance entitles you to a tax reduction, not extra Personal Allowance.

    In January I qualify for state pension
    So will have 3 months payments in this tax year, estimated to total £2,853
    So added to my current pensions the allowance now reduced to £12,894 won't be enough
    What I can't understand is why are they knocking the savings interest off my personal allowance in the first place, regardless of if I get married allowance or not I still have at least £5000 as an additional allowance for that savings interest
    I think you have totally misunderstood how HMRC work.

    They won't know/care/consider if you are expected to get your State Pension in January 2026.  You can defer your State Pension so just because you actually reach State Pension age doesn't mean you will choose to put it into payment.

    Also, you are not taxed on the State Pension payments you receive.  It's your entitlement which counts, not what you paid in each tax year.

    You refer to "current pensions".  Maybe you could clarify how many pensions you are actively taking money from and when the next payment is due?

    Remember you can only use the savings starter rate band once you have used all your Personal Allowance.  And you can only use the savings nil rate band once you have used any savings starter rate band that is available.  At the moment I suspect HMRC are estimating you have some spare Personal Allowance that the interest will use.
  • TheSpectator
    TheSpectator Posts: 862 Forumite
    500 Posts Name Dropper
    Is the P55 for the current tax year 25/26?

    If so then I'm not sure why you are concerned about the current tax code as once the P55 is processed you will have no tax free allowance left and an updated code will be issue.
  • Neversurrender
    Neversurrender Posts: 103 Forumite
    Second Anniversary 10 Posts Name Dropper
    Hi
    Recently I completed a P55 as I do at this time every year, in order to claim back the overpaid tax taken when I flexibly drawdown from my private Sipp pension as a lump sum.
    I always make sure I stay below my tax threshold, to avoid paying Tax.

    My drawdown, together with my other private pension, is total of £13,500
    My allowance is £12,570 + Married allowance of £,1260 = £13,830

    So you can see I've stayed below my personal threshold.

    Now here's  the reason I am posting.

    On completing the P55 it asked for a total of untaxed savings interest, so of course an assumption has to be made of what you expect to earn over this current tax year, in taxable interest.
    I was able to state £963

    So here's the bit I can't get my head around.
    HMRC have deducted £963 from my total personal allowance of £13,830 and left me with an allowance of £12,894

    This cant be right because I have my £1000 + £5000 minus my married allowance of £1,260 making £4,740 for interest I can earn on savings before paying Tax.

    So why did they take it off my taxable income?

    So what if I wanted to receive further income in this tax year, I would have to pay more tax because my untaxed savings interest has chewed up some of my tax allowance.

    Any advice much appreciated 
    Thanks
    If this is an updated tax code and you have taken the one and only pension payment for this tax year then I'm at a loss as to what you think the issue is?

    Who is going to use this tax code if you aren't taking more money out of the pension in this tax year?

    Also, you cannot have a Personal Allowance greater than £12,570.  Marriage Allowance entitles you to a tax reduction, not extra Personal Allowance.

    In January I qualify for state pension
    So will have 3 months payments in this tax year, estimated to total £2,853
    So added to my current pensions the allowance now reduced to £12,894 won't be enough
    What I can't understand is why are they knocking the savings interest off my personal allowance in the first place, regardless of if I get married allowance or not I still have at least £5000 as an additional allowance for that savings interest
    I think you have totally misunderstood how HMRC work.

    They won't know/care/consider if you are expected to get your State Pension in January 2026.  You can defer your State Pension so just because you actually reach State Pension age doesn't mean you will choose to put it into payment.

    Also, you are not taxed on the State Pension payments you receive.  It's your entitlement which counts, not what you paid in each tax year.

    You refer to "current pensions".  Maybe you could clarify how many pensions you are actively taking money from and when the next payment is due?

    Remember you can only use the savings starter rate band once you have used all your Personal Allowance.  And you can only use the savings nil rate band once you have used any savings starter rate band that is available.  At the moment I suspect HMRC are estimating you have some spare Personal Allowance that the interest will use.
    OK thanks,

    Maybe I have misunderstood, I guess that's why I'm posting :-)


    Sorry made slight error before. I forgot I had already included my state pension in the original post, so here's the individual figures

    Here's the income expected this tax year.

    7th April one off lump sum taxable drawdown £7,325.65

    Ongoing  annual DB Pension £3,336

    And that state pension I will be taking from next January 2026
    Jan to March £2,842 ( I get what you said earlier but nevertheless here it is)

    So with reference to your last reply,

    Are you saying if state pension puts me above tax threshold I won't pay tax on that state pension?


  • Nomunnofun1
    Nomunnofun1 Posts: 673 Forumite
    500 Posts Name Dropper
    Using those figures your tax will be:

    Income £13503 less personal allowance 12570 - £933

    Tax at 20% - £186.60
    less marriage allowance -£186.60

    Tax due NIL

    The state pension is taxable but will not suffer tax at source as there is no mechanism so to do. Instead tax will increase at your other sources to cover.


  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 17,557 Forumite
    10,000 Posts Fifth Anniversary Name Dropper
    Hi
    Recently I completed a P55 as I do at this time every year, in order to claim back the overpaid tax taken when I flexibly drawdown from my private Sipp pension as a lump sum.
    I always make sure I stay below my tax threshold, to avoid paying Tax.

    My drawdown, together with my other private pension, is total of £13,500
    My allowance is £12,570 + Married allowance of £,1260 = £13,830

    So you can see I've stayed below my personal threshold.

    Now here's  the reason I am posting.

    On completing the P55 it asked for a total of untaxed savings interest, so of course an assumption has to be made of what you expect to earn over this current tax year, in taxable interest.
    I was able to state £963

    So here's the bit I can't get my head around.
    HMRC have deducted £963 from my total personal allowance of £13,830 and left me with an allowance of £12,894

    This cant be right because I have my £1000 + £5000 minus my married allowance of £1,260 making £4,740 for interest I can earn on savings before paying Tax.

    So why did they take it off my taxable income?

    So what if I wanted to receive further income in this tax year, I would have to pay more tax because my untaxed savings interest has chewed up some of my tax allowance.

    Any advice much appreciated 
    Thanks
    If this is an updated tax code and you have taken the one and only pension payment for this tax year then I'm at a loss as to what you think the issue is?

    Who is going to use this tax code if you aren't taking more money out of the pension in this tax year?

    Also, you cannot have a Personal Allowance greater than £12,570.  Marriage Allowance entitles you to a tax reduction, not extra Personal Allowance.

    In January I qualify for state pension
    So will have 3 months payments in this tax year, estimated to total £2,853
    So added to my current pensions the allowance now reduced to £12,894 won't be enough
    What I can't understand is why are they knocking the savings interest off my personal allowance in the first place, regardless of if I get married allowance or not I still have at least £5000 as an additional allowance for that savings interest
    I think you have totally misunderstood how HMRC work.

    They won't know/care/consider if you are expected to get your State Pension in January 2026.  You can defer your State Pension so just because you actually reach State Pension age doesn't mean you will choose to put it into payment.

    Also, you are not taxed on the State Pension payments you receive.  It's your entitlement which counts, not what you paid in each tax year.

    You refer to "current pensions".  Maybe you could clarify how many pensions you are actively taking money from and when the next payment is due?

    Remember you can only use the savings starter rate band once you have used all your Personal Allowance.  And you can only use the savings nil rate band once you have used any savings starter rate band that is available.  At the moment I suspect HMRC are estimating you have some spare Personal Allowance that the interest will use.
    OK thanks,

    Maybe I have misunderstood, I guess that's why I'm posting :-)

    Sorry made slight error before. I forgot I had already included my state pension in the original post, so here's the individual figures

    Here's the income expected this tax year.

    7th April one off lump sum taxable drawdown £7,325.65

    Ongoing  annual DB Pension £3,336

    And that state pension I will be taking from next January 2026
    Jan to March £2,842 ( I get what you said earlier but nevertheless here it is)

    So with reference to your last reply,

    Are you saying if state pension puts me above tax threshold I won't pay tax on that state pension?
    If your tax code for the ongoing DB pension is 1289M then you will pay no tax on that source of income.  I'm really not sure what issue you think you have here 🤔

    DWP do not deduct tax from State Pension payments.  From the start of the 2026-27 tax year you are going to be paying tax on the DB pension as your tax code is likely to be smaller than that pension.  The DB pension payer will deduct tax.

    HMRC have deducted £963 from my total personal allowance of £13,830 and left me with an allowance of £12,894
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