which one

thebullsback

Received this today . Which option will be best for me?
I can afford to pay the lump sum but also thinking is there any advantage with the second option?

We’re writing to inform you of an issue regarding your recent taxable income payment of £24,751.54 taken from your SIPP . Due to an internal system error, the appropriate tax was not deducted from this payment.

 

From the gross income of £24,751.54, based on the tax code provided by HMRC, you should have received a net income of £19,801.34 with £4,950.20 tax deducted.

 

Please accept our sincere apologies for this oversight. We’ve taken immediate steps to investigate the issue as a matter of priority and will ensure the tax position is rectified as soon as possible.

 

To help us with this, we require your instruction on how you wish for the correction to be made from the following two options:

 

1. Return the tax due – You have the option to return the amount of tax which should have been deducted (£4,950.20). We’ll then correct your records and send the tax to HMRC.

 2 Tax deducted directly from your SIPP – Alternatively, we can adjust our records and pay the tax directly to HMRC from your SIPP.  This would mean that the payment you’ve received would be treated as the net amount and we would calculate the revised gross payment and the tax due.

 

Dazed_and_C0nfused

If you opt for 2 could this potentially be seen as a second taxable payment, not the tax relating to the original payment?

And with option 1 I'm not sure the pension company paying the tax is all that important to you, it's more that they submit revised payroll data to show the tax was deducted.
NB.  I'm assuming the original payroll data showed £24.7k was paid and no tax was deducted.

GrumpyDil

That would just increase the amount taken from your SIPP to closer to £30000. As regards which is better that simply depends on whether you want or need the larger amount of money

thebullsback

So basically Hobsons choice as to pay the lump sum I need to cash in premium bond's or pay extra by having my withdrawal recalculated.  

Albermarle

thebullsback said:

So basically Hobsons choice as to pay the lump sum I need to cash in premium bond's or pay extra by having my withdrawal recalculated.  

Yes I suppose it is , but in real terms you will be no worse off than if they had deducted the correct tax in the first place.

thebullsback

Just checked my online personal Tax and its states £48,173 estimated income for this year . If I go option 2 will I move into 40% taxation ?

ader42

Yes option 2 does sound dangerous, I was going to ask what other taxable income you had in the year… because of potential 40% tax.