HMRC Simple Assessment

Bruno_Bruno

I recently received a Simple assessment calculation from HMRC, claiming I owed them £5042.80 for the 2023-2024 tax year.
I feel like I'm being taxed twice in this scenario !
For this tax year, I earned just under £44,000 from my regular job and after allowing for my personal allowance ( £12,570 ) paid 20% tax on this amount. I also withdrew just over £30,000 from a personal pension and paid a further 20% tax on tis amount.
I received another small pension amount from a different pension and paid a further 20% on that amount.
In total, I paid £12581.20 in tax at the standard 20% tax rate.
However, HMRC then added up my salary for the 2023-2024 tax year and my pension amounts received for th at year which came to just over £75,000. They then deducted my personal allowance of £12,570, which left just under £63,000.
Here's the part I feel aggrieved over - they then taxed £37700 of this total at 20% and just over £25,000 at the higher tax rate of 40%. I've already paid tax on my salary and pension amounts ! The pension amounts were one off's, not a regular income ! I've already paid £12581.20 in tax for that year, yet HMRC are taxing a further amount at 40%, as if it's a regular income for me !
Not only do I feel as though I'm being unfairly double taxed, HMRC are now demanding a further £5042.80 in tax for that year, claiming I should have paid £17624.00 in tax for the 2023-2024 tax year.
Is there a way I can complain / seek redress for this extremely stressful scenario ? HMRC are not very forthcoming when I say I want to take my complaint further. 

eskbanker

Bruno_Bruno said:

I recently received a Simple assessment calculation from HMRC, claiming I owed them £5042.80 for the 2023-2024 tax year.
I feel like I'm being taxed twice in this scenario !
For this tax year, I earned just under £44,000 from my regular job and after allowing for my personal allowance ( £12,570 ) paid 20% tax on this amount. I also withdrew just over £30,000 from a personal pension and paid a further 20% tax on tis amount.
I received another small pension amount from a different pension and paid a further 20% on that amount.
In total, I paid £12581.20 in tax at the standard 20% tax rate.
However, HMRC then added up my salary for the 2023-2024 tax year and my pension amounts received for th at year which came to just over £75,000. They then deducted my personal allowance of £12,570, which left just under £63,000.
Here's the part I feel aggrieved over - they then taxed £37700 of this total at 20% and just over £25,000 at the higher tax rate of 40%. I've already paid tax on my salary and pension amounts ! The pension amounts were one off's, not a regular income ! I've already paid £12581.20 in tax for that year, yet HMRC are taxing a further amount at 40%, as if it's a regular income for me !
Not only do I feel as though I'm being unfairly double taxed, HMRC are now demanding a further £5042.80 in tax for that year, claiming I should have paid £17624.00 in tax for the 2023-2024 tax year.
Is there a way I can complain / seek redress for this extremely stressful scenario ? HMRC are not very forthcoming when I say I want to take my complaint further. 

If you've only ever paid 20% tax on any of these amounts but your aggregate income exceeds the £50,270 threshold then you have underpaid tax, i.e. you only paid 20% when some should have been taxed at 40%.  The fact that some income was 'one-off' rather than regular is irrelevant.

If you received about £75K of taxable income, exceeding the higher rate threshold by about £25K, then it is completely fair and accurate for the extra 20% of £25K, i.e. circa £5K, to be recovered by HMRC, so there wouldn't appear to be anything to complain about?

Albermarle

Why do you think you should not pay any 40% tax, when your total taxable income is £75K ?

Here's the part I feel aggrieved over - they then taxed £37700 of this total at 20% and just over £25,000 at the higher tax rate of 40%. I've already paid tax on my salary and pension amounts ! Yes but not enough.

By the way it is a bit late for getting a simple assessment for tax year 23/24. Do you mean 24/25?
In either case the HMRC calculation looks correct anyway.

hara____

OP, if this is an unfamiliar situation for you, one simple explanation that might help is:

When you withdrew the £30,000 from your pension, the pension provider would not have known about your £44,000 of income. So they could not have known that those two sources of income, combined, would push you into the 40% tax band. The best they could do was tax it at 20% as a 'provisional' step.

It's only when HMRC look at all of your income, from all sources, that tax can be calculated accurately. Now they've done that, they are telling you the difference between what you paid 'provisionally' and what you need to pay. 

poseidon1

itsthelittlethings said:

I don’t think you fully understand how tax works.

But in all fairness to the OP, neither does the majority of the working population.

Those who take time and effort to research and understand the system are a small minority. I am still amazed at the  misapprehension held by some people,  that moving  into higher rate tax means one's entire income is taxed at 40% or above.

monkey-fingers

Just as an aside, is the pension amount less than 25% of the OPs entire pension and they've not taken out before?

Because you can take 25% of your pension out tax-free if you're over 55.
https://www.gov.uk/tax-on-pension/tax-free

DRS1

monkey-fingers said:

Just as an aside, is the pension amount less than 25% of the OPs entire pension and they've not taken out before?

Because you can take 25% of your pension out tax-free if you're over 55.
https://www.gov.uk/tax-on-pension/tax-free

The pension provider probably would not have deducted 20% tax if the payment was a tax free lump sum.

UnsureAboutthis

poseidon1 said:

itsthelittlethings said:

I don’t think you fully understand how tax works.

But in all fairness to the OP, neither does the majority of the working population.

Those who take time and effort to research and understand the system are a small minority. I am still amazed at the  misapprehension held by some people,  that moving  into higher rate tax means one's entire income is taxed at 40% or above.

Exactly that. Tax is a complex animal. Millions don't
understand the full workings of this, anything for that matter.

People post here to seek help/advice/guidance/recommendations and 
99.9% will then add a bit more of their own research to reach their
goal, having a better grasp on this.

My tax returns does my head in, I just pay, and this year, I noted the 
tax people owned me money when I logged into the self-assessment.
As I said, tax is a very complex animal and even
Accountants can seek advice

itsthelittlethings

UnsureAboutthis said:

poseidon1 said:

itsthelittlethings said:

I don’t think you fully understand how tax works.

But in all fairness to the OP, neither does the majority of the working population.

Those who take time and effort to research and understand the system are a small minority. I am still amazed at the  misapprehension held by some people,  that moving  into higher rate tax means one's entire income is taxed at 40% or above.

Exactly that. Tax is a complex animal. Millions don't
understand the full workings of this, anything for that matter.

People post here to seek help/advice/guidance/recommendations and 
99.9% will then add a bit more of their own research to reach their
goal, having a better grasp on this.

My tax returns does my head in, I just pay, and this year, I noted the 
tax people owned me money when I logged into the self-assessment.
As I said, tax is a very complex animal and even
Accountants can seek advice

Tax can get very complex but thinking you should be earning 44k on PAYE then take as many pension withdrawals as you like and only be charged at 20% demonstrates a lack of awareness of even the basics.

poseidon1

itsthelittlethings said:

UnsureAboutthis said:

poseidon1 said:

itsthelittlethings said:

I don’t think you fully understand how tax works.

But in all fairness to the OP, neither does the majority of the working population.

Those who take time and effort to research and understand the system are a small minority. I am still amazed at the  misapprehension held by some people,  that moving  into higher rate tax means one's entire income is taxed at 40% or above.

Exactly that. Tax is a complex animal. Millions don't
understand the full workings of this, anything for that matter.

People post here to seek help/advice/guidance/recommendations and 
99.9% will then add a bit more of their own research to reach their
goal, having a better grasp on this.

My tax returns does my head in, I just pay, and this year, I noted the 
tax people owned me money when I logged into the self-assessment.
As I said, tax is a very complex animal and even
Accountants can seek advice

Tax can get very complex but thinking you should be earning 44k on PAYE then take as many pension withdrawals as you like and only be charged at 20% demonstrates a lack of awareness of even the basics.

But even the 'basics' can be unexpectedly complex.

 Consider the plight of hapless Scots having to battle with 6 different tax bands ranging from 19% to 48%, with the 45% rate kicking in at £75k compared to England's £125k threshold. Certainly baffled me when considering a move to Scotland.

Dazed_and_C0nfused

poseidon1 said:

itsthelittlethings said:

UnsureAboutthis said:

poseidon1 said:

itsthelittlethings said:

I don’t think you fully understand how tax works.

But in all fairness to the OP, neither does the majority of the working population.

Those who take time and effort to research and understand the system are a small minority. I am still amazed at the  misapprehension held by some people,  that moving  into higher rate tax means one's entire income is taxed at 40% or above.

Exactly that. Tax is a complex animal. Millions don't
understand the full workings of this, anything for that matter.

People post here to seek help/advice/guidance/recommendations and 
99.9% will then add a bit more of their own research to reach their
goal, having a better grasp on this.

My tax returns does my head in, I just pay, and this year, I noted the 
tax people owned me money when I logged into the self-assessment.
As I said, tax is a very complex animal and even
Accountants can seek advice

Tax can get very complex but thinking you should be earning 44k on PAYE then take as many pension withdrawals as you like and only be charged at 20% demonstrates a lack of awareness of even the basics.

But even the 'basics' can be unexpectedly complex.

 Consider the plight of hapless Scots having to battle with 6 different tax bands ranging from 19% to 48%, with the 45% rate kicking in at £75k compared to England's £125k threshold. Certainly baffled me when considering a move to Scotland.

Plus the five savings rates/bands and four for dividends the Scottish are subject to 😖