Workplace Pension

penners324

HoolyNI said:

dasherman said:

In my case there was a gap of about 5 months between leaving work and beginning to drawdown my personal pension, at a rate to be able to keep within the personal allowance.

I was expecting to be taxed on at least the first monthly payment, but wasn't and haven't been in the 2 years I've been doing it.

I'm not sure whether the 5 month gap was a factor or not, but I was pleased I didn't have to chase HMRC.

I changed jobs a few times since the workplace pension started, so I have been left with three small lump sums and an old SERPs-related pension. I cashed the smallest one in last March to test the water and was taxed appropriately, but there has been no mention yet from HMRC regarding any refund despite having no other income for the last tax year. Just trying to avoid having to chase them for larger sums.

You apply for the refund through the hmrc app or website 

HoolyNI

I have the HMRC app and have messaged them regarding the issue a few times, but no response as yet. I also tried to transfer everything into the SERPS pension, as it has the most in it, but it isn't accepting any more payments; it had been dormant for a long time, so perhaps that's why. I will just cash them in over the next three tax years and chase them for my refunds.

Dazed_and_C0nfused

HoolyNI said:

I have the HMRC app and have messaged them regarding the issue a few times, but no response as yet. I also tried to transfer everything into the SERPS pension, as it has the most in it, but it isn't accepting any more payments; it had been dormant for a long time, so perhaps that's why. I will just cash them in over the next three tax years and chase them for my refunds.

How do you send a message in the App?

In your original post you mentioned 20% tax being deducted but that would normally only happen if you took the whole of a pension in one go under the "small pots" rules.

If you aren't using the small pots rules then the emergency tax code, 1257L, will be used on the first payment.  This means no tax would be deducted unless you took more than £1,048 in taxable income for your first payment.

HoolyNI

I must have been given an option to contact them as I have two "submitted forms" one dated 01-11-2025 marked as "completed".

Yes, taking the lot in one go is my plan for two of them, then splitting the other over two tax years to stay under my tax free allowance. I don't want to do anything until I'm sure I will get any tax back without having to jump through too many hoops. None of the three pensions would generate any significant monthly income.

HoolyNI

penners324 said:

HoolyNI said:

dasherman said:

In my case there was a gap of about 5 months between leaving work and beginning to drawdown my personal pension, at a rate to be able to keep within the personal allowance.

I was expecting to be taxed on at least the first monthly payment, but wasn't and haven't been in the 2 years I've been doing it.

I'm not sure whether the 5 month gap was a factor or not, but I was pleased I didn't have to chase HMRC.

I changed jobs a few times since the workplace pension started, so I have been left with three small lump sums and an old SERPs-related pension. I cashed the smallest one in last March to test the water and was taxed appropriately, but there has been no mention yet from HMRC regarding any refund despite having no other income for the last tax year. Just trying to avoid having to chase them for larger sums.

You apply for the refund through the hmrc app or website 

Thats what I have done for the first pension but Im still waiting on my refund. I was hoping to avoid having to chase them for my future refunds but obviously that isn't possible.

molerat

molerat said:

In answer to your question, no, there is not a form to fill in to avoid paying tax.  If you understand how the PAYE system works then you can use that to your advantage and phase withdrawals to pay no tax.

My earlier post.  it is entirely possible to avoid having to chase for a tax refund by understanding how the PAYE tax system works and phasing any withdrawals to work within that system.  Both myself and MrsM make regular ad hoc pension withdrawals and have never had to reclaim any tax.

Storcko14

As Molerat says understanding PAYE is very useful.  I have 2 pensions in payment now - one a DB - and after reading some advice on here, have taken an element of TFLS from my SIPP separately from the taxable element (i.e., not UFPLS) and have calculated the monthly taxable draw so that my total projected taxable income for this FY comes to less than the personal allowance.  On my HMRC tax summary I can see that HMRC estimate that I won't pay any tax on these payments.

HoolyNI

molerat said:

molerat said:

In answer to your question, no, there is not a form to fill in to avoid paying tax.  If you understand how the PAYE system works then you can use that to your advantage and phase withdrawals to pay no tax.

My earlier post.  it is entirely possible to avoid having to chase for a tax refund by understanding how the PAYE tax system works and phasing any withdrawals to work within that system.  Both myself and MrsM make regular ad hoc pension withdrawals and have never had to reclaim any tax.

Well, during the 24/25 tax year I had no other income; the pension lump sum paid in was well under my personal allowance, and yet I paid full whack tax. How could I have avoided that by understanding how the PAYE tax system works?

That is really what the whole point of starting this thread was about.

Dazed_and_C0nfused

HoolyNI said:

molerat said:

molerat said:

In answer to your question, no, there is not a form to fill in to avoid paying tax.  If you understand how the PAYE system works then you can use that to your advantage and phase withdrawals to pay no tax.

My earlier post.  it is entirely possible to avoid having to chase for a tax refund by understanding how the PAYE tax system works and phasing any withdrawals to work within that system.  Both myself and MrsM make regular ad hoc pension withdrawals and have never had to reclaim any tax.

Well, during the 24/25 tax year I had no other income; the pension lump sum paid in was well under my personal allowance, and yet I paid full whack tax. How could I have avoided that by understanding how the PAYE tax system works?

That is really what the whole point of starting this thread was about.

You mean 50% tax was deducted from the whole payment?  That would be very unusual for a first pension payment.

Some or all of 0%, 20%, 40% and 45% is far more common.  Be used the emergency tax code (1257L) is generally used on the first payment paying no tax is also quite common.

To understand how things will work for you you really need to explain your own situation.  What tax code is in place now you have taken money out of the pension?  How much do you expect to take from now on?  How regularly will you take payments?  Do you have any other taxable income? 

DRS1

HoolyNI said:

molerat said:

molerat said:

In answer to your question, no, there is not a form to fill in to avoid paying tax.  If you understand how the PAYE system works then you can use that to your advantage and phase withdrawals to pay no tax.

My earlier post.  it is entirely possible to avoid having to chase for a tax refund by understanding how the PAYE tax system works and phasing any withdrawals to work within that system.  Both myself and MrsM make regular ad hoc pension withdrawals and have never had to reclaim any tax.

Well, during the 24/25 tax year I had no other income; the pension lump sum paid in was well under my personal allowance, and yet I paid full whack tax. How could I have avoided that by understanding how the PAYE tax system works?

That is really what the whole point of starting this thread was about.

Someone will correct me if I am wrong but I think the key is to take a small amount of taxable income first to trigger a PAYE code.

You can then take the bulk of the taxable income in small  monthly amounts (as suggested by @molerat) or just take it all in one go in March.

So for example if you have a pension worth £16k you could take £4100 in June with the £4000 being the TFLS and the £100 being taxable income.  I am not sure but hopefully £100 is small enough that no tax is deducted under the emergency tax regime.  But even if tax is deducted then you would get it back in a later payment.  Then you take the remaining £11900 in March and I believe there would be no tax deducted if you had a 1257L code.

If you took the £11900 in October say then there would be tax deducted because you have not got anywhere near the end of the tax year.

Someone will be able to say what monthly amount has no tax deducted with a 1257L code but I suspect that £1000 per month may be safe spread over a whole tax year.