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Workplace Pension

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Comments

  • HoolyNI
    HoolyNI Posts: 286
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    I have no other taxable income. I transfer 10% of my tax allowance to my wife, which gives me a tax code of 1131N.

    I lifted a small pension in March 2025, 25% of which was tax-free; the remaining 75% was taxed at 20%. I now understand that this will happen by default on all pensions that are cashed in, but how do I get that back? I have checked my tax account online, and it is stating that I paid the correct amount of tax for 24/25 even though I clearly didn't, as I had no other taxable income for that year, and the pension I lifted was well under my tax allowance for that year. It also states that "BR" [basic rate] was the tax code used for the pension and "This could be because you have more than one employment or pension," which I don't.

    I don't want to cash the larger pensions in until I can establish how I will claw back any tax that I end up paying.



  • HoolyNI said:

    I have no other taxable income. I transfer 10% of my tax allowance to my wife, which gives me a tax code of 1131N.

    I lifted a small pension in March 2025, 25% of which was tax-free; the remaining 75% was taxed at 20%. I now understand that this will happen by default on all pensions that are cashed in, but how do I get that back? I have checked my tax account online, and it is stating that I paid the correct amount of tax for 24/25 even though I clearly didn't, as I had no other taxable income for that year, and the pension I lifted was well under my tax allowance for that year. It also states that "BR" [basic rate] was the tax code used for the pension and "This could be because you have more than one employment or pension," which I don't.

    I don't want to cash the larger pensions in until I can establish how I will claw back any tax that I end up paying.

    That doesn't happen by default on all pensions that are cashed in.

    20% tax (code BR) is usually only applied if the pension is specifically taken under the "small pots" rules (this doesn't mean it just happens to be a small amount).

    Are you sure there isn't an option to claim the overpaid tax on your Personal Tax Account?  As in you have overpaid £X, which bank account do you want the refund transferring to?

    If not you are probably best calling to check what has happened as most refunds are paid by now for 2024/25.

  • HoolyNI
    HoolyNI Posts: 286
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    It was definitely under the small pots rule and it closed my account with Now Pensions. That option is not there, it actually states that I have paid the correct amount for 24/25. I will ring them in the New Year as I'd like to know before cashing another one in next March. I had hoped I could declare that I had no other taxable income to avoid having to chase my refund, but obviously that isn't possible. Thanks to all for your advice.
  • molerat
    molerat Posts: 36,594
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    edited 19 December 2025 at 4:44PM
    If you take large lump sums from pensions you cannot avoid paying fairly large amounts of tax and will need to reclaim it which can take anything from a few weeks to several months and generally needs doing within the same tax year.  But if you can take smaller amounts, which could mean transferring the pension to another provider, you can work within the PAYE system to pay no tax or have any tax deducted repaid in M12 of the same year.

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