Small Pot and HMRC tax code

Random47

Just highlighting my experience:

I received a £10K small pot via my SIPP held by Hargreaves Lansdown. It took about 36 hours from instruction to sell and £ value realised. Though wish I'd help of a couple of weeks given most recent surge in share values (but hey ho). On application for small pot it took about 9 days for them to confirm receipt of application and about 10 days for money to then be paid into my account.

The HMRC within 2 days emailed to say tax code change. On access to my HMRC account they had the HL payment received and assumed it was going to be a monthly payment. There was a link to adjust this and I changed if from the HMRC assumed increased income of £75K this year to the actual extra £7.5K small pot payment (taxable element). Within 24 hours HMRC had adjusted tax code to roughly what I had originally expected.

So all in all things worked just as they should have

Albermarle

A small pot withdrawal will close that pension account, and you should get a P45 and HMRC should know that it is closed and no further payments will be made.
However the same thing happened to me with a HL small pot ( but not with an Aj Bell one)

Dazed_and_C0nfused

Random47 said:

Just highlighting my experience:

I received a £10K small pot via my SIPP held by Hargreaves Lansdown. It took about 36 hours from instruction to sell and £ value realised. Though wish I'd help of a couple of weeks given most recent surge in share values (but hey ho). On application for small pot it took about 9 days for them to confirm receipt of application and about 10 days for money to then be paid into my account.

The HMRC within 2 days emailed to say tax code change. On access to my HMRC account they had the HL payment received and assumed it was going to be a monthly payment. There was a link to adjust this and I changed if from the HMRC assumed increased income of £75K this year to the actual extra £7.5K small pot payment (taxable element). Within 24 hours HMRC had adjusted tax code to roughly what I had originally expected.

So all in all things worked just as they should have

I 'm not entirely convinced by that to be honest.

If it was a "small pot" then the entire pot should have been taken in one go and HL would have reported both a start and end date on the Real Time Information submission they have to send to HMRC.

At which point HMRC would know that the only taxable income from that pension would be the £7.5k.

I wonder if HL omitted the end date?

Albermarle

Dazed_and_C0nfused said:

Random47 said:

Just highlighting my experience:

I received a £10K small pot via my SIPP held by Hargreaves Lansdown. It took about 36 hours from instruction to sell and £ value realised. Though wish I'd help of a couple of weeks given most recent surge in share values (but hey ho). On application for small pot it took about 9 days for them to confirm receipt of application and about 10 days for money to then be paid into my account.

The HMRC within 2 days emailed to say tax code change. On access to my HMRC account they had the HL payment received and assumed it was going to be a monthly payment. There was a link to adjust this and I changed if from the HMRC assumed increased income of £75K this year to the actual extra £7.5K small pot payment (taxable element). Within 24 hours HMRC had adjusted tax code to roughly what I had originally expected.

So all in all things worked just as they should have

I 'm not entirely convinced by that to be honest.

If it was a "small pot" then the entire pot should have been taken in one go and HL would have reported both a start and end date on the Real Time Information submission they have to send to HMRC.

At which point HMRC would know that the only taxable income from that pension would be the £7.5k.

I wonder if HL omitted the end date?

For my small pot withdrawal from HL, I received a P45 and in my online tax account it was clear that my 'employment' had ended.
However it still messed up my tax code in the same way as the OP.
I took one also from Aj Bell and that did not affect my tax code.

Random47

Dazed_and_C0nfused said:

Random47 said:

I 'm not entirely convinced by that to be honest.

If it was a "small pot" then the entire pot should have been taken in one go and HL would have reported both a start and end date on the Real Time Information submission they have to send to HMRC.

At which point HMRC would know that the only taxable income from that pension would be the £7.5k.

I wonder if HL omitted the end date?

Definitely was small pot (that was ticked on application form etc.). HL took £10K tranche from my overall SIPP. I am not aware of RTI from HL to HMRC, this is a bit above my knowledge base. I have just assumed that the HMRC took view that the payment was going to be made every month, hence initial wrong tax code applied.