Tax on small LGPS pension

dont_use_vistaprint

I took my deferred / reduced LGPS from  Dec with an increased lump sum. They said they will pay it monthly and my tax code updated today to 1257LX. Currently no other income except interest on UK savings , total annual income below 17500 & I'm putting the max allowed each year into SIPP from savings. 

My understanding is I should not pay any tax, but the pension starting and tax code change indicates I will ? 

Do I need to complete forms for a refund or will it likely resolve itself and a refund if any tax will come ?

I know that last year overpaid PAYE  took a long time for those that did not complete SA, Oct/Nov after the tax year end for many and I don't want to wait until then & also HMRC informed me to no longer complete SA.

what should I do when payments begin with inevitable tax deductions ? 

 

Dazed_and_C0nfused

dont_use_vistaprint said:

I took my deferred / reduced LGPS from  Dec with an increased lump sum. They said they will pay it monthly and my tax code updated today to 1257LX. Currently no other income except interest on UK savings , total annual income below 17500 & I'm putting the max allowed each year into SIPP from savings. 

My understanding is I should not pay any tax, but the pension starting and tax code change indicates I will ? 

Do I need to complete forms for a refund or will it likely resolve itself and a refund if any tax will come ?

I know that last year overpaid PAYE  took a long time for those that did not complete SA, Oct/Nov after the tax year end for many and I don't want to wait until then & also HMRC informed me to no longer complete SA.

what should I do when payments begin with inevitable tax deductions ? 

 

How much is this "small" LGPS pension each month?

What do you expect your LGPS P60 in April 2025 to show your pension income for this tax year to be?

Your current income doesn't particularly matter, it's the income for this tax year which is important.  Have you had any earnings or other (taxable) pension income in this tax year?

dont_use_vistaprint

Dazed_and_C0nfused said:

dont_use_vistaprint said:

I took my deferred / reduced LGPS from  Dec with an increased lump sum. They said they will pay it monthly and my tax code updated today to 1257LX. Currently no other income except interest on UK savings , total annual income below 17500 & I'm putting the max allowed each year into SIPP from savings. 

My understanding is I should not pay any tax, but the pension starting and tax code change indicates I will ? 

Do I need to complete forms for a refund or will it likely resolve itself and a refund if any tax will come ?

I know that last year overpaid PAYE  took a long time for those that did not complete SA, Oct/Nov after the tax year end for many and I don't want to wait until then & also HMRC informed me to no longer complete SA.

what should I do when payments begin with inevitable tax deductions ? 

 

How much is this "small" LGPS pension each month?

What do you expect your LGPS P60 in April 2025 to show your pension income for this tax year to be?

Your current income doesn't particularly matter, it's the income for this tax year which is important.  Have you had any earnings or other (taxable) pension income in this tax year?

I think it's about 6000 a year so December to March 25/26 should only be around £2000. no other pension or employment income this year, just savings interest , which is over the allowance for savings but  didn't trigger tax last year on sa  because I kept everything below 17.5  , and will  do the same this year  this is the first time I've drawn anything, SIPP is still uncrystallised i'm not planning any drawdown yet

Dazed_and_C0nfused

dont_use_vistaprint said:

Dazed_and_C0nfused said:

dont_use_vistaprint said:

I took my deferred / reduced LGPS from  Dec with an increased lump sum. They said they will pay it monthly and my tax code updated today to 1257LX. Currently no other income except interest on UK savings , total annual income below 17500 & I'm putting the max allowed each year into SIPP from savings. 

My understanding is I should not pay any tax, but the pension starting and tax code change indicates I will ? 

Do I need to complete forms for a refund or will it likely resolve itself and a refund if any tax will come ?

I know that last year overpaid PAYE  took a long time for those that did not complete SA, Oct/Nov after the tax year end for many and I don't want to wait until then & also HMRC informed me to no longer complete SA.

what should I do when payments begin with inevitable tax deductions ? 

 

How much is this "small" LGPS pension each month?

What do you expect your LGPS P60 in April 2025 to show your pension income for this tax year to be?

Your current income doesn't particularly matter, it's the income for this tax year which is important.  Have you had any earnings or other (taxable) pension income in this tax year?

I think it's about 6000 a year so December to March 25/26 should only be around £2000. no other pension or employment income this year, just savings interest , which is over the allowance for savings but  didn't trigger tax last year on sa  because I kept everything below 17.5  , and will  do the same this year  this is the first time I've drawn anything, SIPP is still uncrystallised i'm not planning any drawdown yet

I don't know why you think any tax will be deducted then 🤔

1257L is the emergency code and means the first £1,048 each month has no tax deducted.

There is no extra "allowance" for savings interest but there are two 0% tax rates/bands which you can use, but only after your Personal Allowance has been fully used.

dont_use_vistaprint

Dazed_and_C0nfused said:

dont_use_vistaprint said:

Dazed_and_C0nfused said:

dont_use_vistaprint said:

I took my deferred / reduced LGPS from  Dec with an increased lump sum. They said they will pay it monthly and my tax code updated today to 1257LX. Currently no other income except interest on UK savings , total annual income below 17500 & I'm putting the max allowed each year into SIPP from savings. 

My understanding is I should not pay any tax, but the pension starting and tax code change indicates I will ? 

Do I need to complete forms for a refund or will it likely resolve itself and a refund if any tax will come ?

I know that last year overpaid PAYE  took a long time for those that did not complete SA, Oct/Nov after the tax year end for many and I don't want to wait until then & also HMRC informed me to no longer complete SA.

what should I do when payments begin with inevitable tax deductions ? 

 

How much is this "small" LGPS pension each month?

What do you expect your LGPS P60 in April 2025 to show your pension income for this tax year to be?

Your current income doesn't particularly matter, it's the income for this tax year which is important.  Have you had any earnings or other (taxable) pension income in this tax year?

I think it's about 6000 a year so December to March 25/26 should only be around £2000. no other pension or employment income this year, just savings interest , which is over the allowance for savings but  didn't trigger tax last year on sa  because I kept everything below 17.5  , and will  do the same this year  this is the first time I've drawn anything, SIPP is still uncrystallised i'm not planning any drawdown yet

I don't know why you think any tax will be deducted then 🤔

1257L is the emergency code and means the first £1,048 each month has no tax deducted.

There is no extra "allowance" for savings interest but there are two 0% tax rates/bands which you can use, but only after your Personal Allowance has been fully used.

Because everything I've been told and read on here suggests that it will be taxed as a week 1 basis at flat rate of 20% with no personal allowance 


I understand how savings allowance works, I've been doing self assessment for many many years. Last year I exceeded the £5000 in savings but still did not pay tax because my overall uk earnings was below 17.5.



there is an allowance for savings interest even if you choose not to call it that it's our HMRC describe it

Your allowances for earning interest before you have to pay tax on it include your:

• Personal Allowance
• starting rate for savings
• Personal Savings Allowance

You get these allowances each tax year (6 April to 5 April). How much you get depends on your other income.

Note the words allowance and allowances

Dazed_and_C0nfused

dont_use_vistaprint said:

Dazed_and_C0nfused said:

dont_use_vistaprint said:

Dazed_and_C0nfused said:

dont_use_vistaprint said:

I took my deferred / reduced LGPS from  Dec with an increased lump sum. They said they will pay it monthly and my tax code updated today to 1257LX. Currently no other income except interest on UK savings , total annual income below 17500 & I'm putting the max allowed each year into SIPP from savings. 

My understanding is I should not pay any tax, but the pension starting and tax code change indicates I will ? 

Do I need to complete forms for a refund or will it likely resolve itself and a refund if any tax will come ?

I know that last year overpaid PAYE  took a long time for those that did not complete SA, Oct/Nov after the tax year end for many and I don't want to wait until then & also HMRC informed me to no longer complete SA.

what should I do when payments begin with inevitable tax deductions ? 

 

How much is this "small" LGPS pension each month?

What do you expect your LGPS P60 in April 2025 to show your pension income for this tax year to be?

Your current income doesn't particularly matter, it's the income for this tax year which is important.  Have you had any earnings or other (taxable) pension income in this tax year?

I think it's about 6000 a year so December to March 25/26 should only be around £2000. no other pension or employment income this year, just savings interest , which is over the allowance for savings but  didn't trigger tax last year on sa  because I kept everything below 17.5  , and will  do the same this year  this is the first time I've drawn anything, SIPP is still uncrystallised i'm not planning any drawdown yet

I don't know why you think any tax will be deducted then 🤔

1257L is the emergency code and means the first £1,048 each month has no tax deducted.

There is no extra "allowance" for savings interest but there are two 0% tax rates/bands which you can use, but only after your Personal Allowance has been fully used.

Because everything I've been told and read on here suggests that it will be taxed as a week 1 basis at flat rate of 20% with no personal allowance 

I understand how savings allowance works, I've been doing self assessment for many many years

Can you provide a link to a post where that is suggested?

The main time that would normally happen is if a pension was taken under the "small pots" rules.  Taking a deferred DB pension is not happening under those rules.

If the monthly payment is £1,048 or less it really doesn't matter if it's on a cumulative or non cumulative basis, no tax would be deducted either way.

dont_use_vistaprint

Dazed_and_C0nfused said:

dont_use_vistaprint said:

Dazed_and_C0nfused said:

dont_use_vistaprint said:

Dazed_and_C0nfused said:

dont_use_vistaprint said:

I took my deferred / reduced LGPS from  Dec with an increased lump sum. They said they will pay it monthly and my tax code updated today to 1257LX. Currently no other income except interest on UK savings , total annual income below 17500 & I'm putting the max allowed each year into SIPP from savings. 

My understanding is I should not pay any tax, but the pension starting and tax code change indicates I will ? 

Do I need to complete forms for a refund or will it likely resolve itself and a refund if any tax will come ?

I know that last year overpaid PAYE  took a long time for those that did not complete SA, Oct/Nov after the tax year end for many and I don't want to wait until then & also HMRC informed me to no longer complete SA.

what should I do when payments begin with inevitable tax deductions ? 

 

How much is this "small" LGPS pension each month?

What do you expect your LGPS P60 in April 2025 to show your pension income for this tax year to be?

Your current income doesn't particularly matter, it's the income for this tax year which is important.  Have you had any earnings or other (taxable) pension income in this tax year?

I think it's about 6000 a year so December to March 25/26 should only be around £2000. no other pension or employment income this year, just savings interest , which is over the allowance for savings but  didn't trigger tax last year on sa  because I kept everything below 17.5  , and will  do the same this year  this is the first time I've drawn anything, SIPP is still uncrystallised i'm not planning any drawdown yet

I don't know why you think any tax will be deducted then 🤔

1257L is the emergency code and means the first £1,048 each month has no tax deducted.

There is no extra "allowance" for savings interest but there are two 0% tax rates/bands which you can use, but only after your Personal Allowance has been fully used.

Because everything I've been told and read on here suggests that it will be taxed as a week 1 basis at flat rate of 20% with no personal allowance 

I understand how savings allowance works, I've been doing self assessment for many many years

Can you provide a link to a post where that is suggested?

The main time that would normally happen is if a pension was taken under the "small pots" rules.  Taking a deferred DB pension is not happening under those rules.

If the monthly payment is £1,048 or less it really doesn't matter if it's on a cumulative or non cumulative basis, no tax would be deducted either way.

Thanks maybe the LGPS is different but there are lots of posts on here about tax being taken on week one basis &  needing to fill out a form to claim it back when you first start drawing a pension  so I assumed LGPS  would be the same. I should know in a few few days anyway! 

dont_use_vistaprint

Dazed_and_C0nfused said:

dont_use_vistaprint said:

Dazed_and_C0nfused said:

dont_use_vistaprint said:

I took my deferred / reduced LGPS from  Dec with an increased lump sum. They said they will pay it monthly and my tax code updated today to 1257LX. Currently no other income except interest on UK savings , total annual income below 17500 & I'm putting the max allowed each year into SIPP from savings. 

My understanding is I should not pay any tax, but the pension starting and tax code change indicates I will ? 

Do I need to complete forms for a refund or will it likely resolve itself and a refund if any tax will come ?

I know that last year overpaid PAYE  took a long time for those that did not complete SA, Oct/Nov after the tax year end for many and I don't want to wait until then & also HMRC informed me to no longer complete SA.

what should I do when payments begin with inevitable tax deductions ? 

 

How much is this "small" LGPS pension each month?

What do you expect your LGPS P60 in April 2025 to show your pension income for this tax year to be?

Your current income doesn't particularly matter, it's the income for this tax year which is important.  Have you had any earnings or other (taxable) pension income in this tax year?

I think it's about 6000 a year so December to March 25/26 should only be around £2000. no other pension or employment income this year, just savings interest , which is over the allowance for savings but  didn't trigger tax last year on sa  because I kept everything below 17.5  , and will  do the same this year  this is the first time I've drawn anything, SIPP is still uncrystallised i'm not planning any drawdown yet

I don't know why you think any tax will be deducted then 🤔

Because Google says that my tax code LX is an emergency week one basis code and everything I've read on these forums  suggests they will deduct tax at flat rate of 20% of the whole amount 

Dazed_and_C0nfused

dont_use_vistaprint said:

Dazed_and_C0nfused said:

dont_use_vistaprint said:

Dazed_and_C0nfused said:

dont_use_vistaprint said:

I took my deferred / reduced LGPS from  Dec with an increased lump sum. They said they will pay it monthly and my tax code updated today to 1257LX. Currently no other income except interest on UK savings , total annual income below 17500 & I'm putting the max allowed each year into SIPP from savings. 

My understanding is I should not pay any tax, but the pension starting and tax code change indicates I will ? 

Do I need to complete forms for a refund or will it likely resolve itself and a refund if any tax will come ?

I know that last year overpaid PAYE  took a long time for those that did not complete SA, Oct/Nov after the tax year end for many and I don't want to wait until then & also HMRC informed me to no longer complete SA.

what should I do when payments begin with inevitable tax deductions ? 

 

How much is this "small" LGPS pension each month?

What do you expect your LGPS P60 in April 2025 to show your pension income for this tax year to be?

Your current income doesn't particularly matter, it's the income for this tax year which is important.  Have you had any earnings or other (taxable) pension income in this tax year?

I think it's about 6000 a year so December to March 25/26 should only be around £2000. no other pension or employment income this year, just savings interest , which is over the allowance for savings but  didn't trigger tax last year on sa  because I kept everything below 17.5  , and will  do the same this year  this is the first time I've drawn anything, SIPP is still uncrystallised i'm not planning any drawdown yet

I don't know why you think any tax will be deducted then 🤔

Because Google says that my tax code LX is an emergency week one basis code and everything I've read on these forums  suggests they will deduct tax at flat rate of 20% of the whole amount 

I can only think you are misunderstanding what you have read.

The L has no impact on the tax deducted, it's just an administrative thing which makes life easier for HMRC, employers and pension payers when tax codes change as a result of Budget announcements.

And the X isn't part of the tax code, it just indicates that the code should be used on a non-cumulative basis. 

A code of 1257L, whether cumulative or non-cumulative, means no tax would be deducted from the first £1,048 (assuming your pension is paid on a monthly basis).

Notepad_Phil

dont_use_vistaprint said:

Dazed_and_C0nfused said:

dont_use_vistaprint said:

Dazed_and_C0nfused said:

dont_use_vistaprint said:

Dazed_and_C0nfused said:

dont_use_vistaprint said:

I took my deferred / reduced LGPS from  Dec with an increased lump sum. They said they will pay it monthly and my tax code updated today to 1257LX. Currently no other income except interest on UK savings , total annual income below 17500 & I'm putting the max allowed each year into SIPP from savings. 

My understanding is I should not pay any tax, but the pension starting and tax code change indicates I will ? 

Do I need to complete forms for a refund or will it likely resolve itself and a refund if any tax will come ?

I know that last year overpaid PAYE  took a long time for those that did not complete SA, Oct/Nov after the tax year end for many and I don't want to wait until then & also HMRC informed me to no longer complete SA.

what should I do when payments begin with inevitable tax deductions ? 

 

How much is this "small" LGPS pension each month?

What do you expect your LGPS P60 in April 2025 to show your pension income for this tax year to be?

Your current income doesn't particularly matter, it's the income for this tax year which is important.  Have you had any earnings or other (taxable) pension income in this tax year?

I think it's about 6000 a year so December to March 25/26 should only be around £2000. no other pension or employment income this year, just savings interest , which is over the allowance for savings but  didn't trigger tax last year on sa  because I kept everything below 17.5  , and will  do the same this year  this is the first time I've drawn anything, SIPP is still uncrystallised i'm not planning any drawdown yet

I don't know why you think any tax will be deducted then 🤔

1257L is the emergency code and means the first £1,048 each month has no tax deducted.

There is no extra "allowance" for savings interest but there are two 0% tax rates/bands which you can use, but only after your Personal Allowance has been fully used.

Because everything I've been told and read on here suggests that it will be taxed as a week 1 basis at flat rate of 20% with no personal allowance 

I understand how savings allowance works, I've been doing self assessment for many many years

Can you provide a link to a post where that is suggested?

The main time that would normally happen is if a pension was taken under the "small pots" rules.  Taking a deferred DB pension is not happening under those rules.

If the monthly payment is £1,048 or less it really doesn't matter if it's on a cumulative or non cumulative basis, no tax would be deducted either way.

Thanks maybe the LGPS is different but there are lots of posts on here about tax being taken on week one basis &  needing to fill out a form to claim it back when you first start drawing a pension  so I assumed LGPS  would be the same. I should know in a few few days anyway! 

There are indeed many posts about this type of thing happening, but the big difference to your situation is that they took out multiple thousands in one go, whereas it would appear you'll just be receiving about £500 per month and so will be well within the limits where you would start paying tax on a 1257 tax code.

DRS1

You could try logging on to your personal tax account.  You may find a PAYE box has appeared on there and it should show you the payment and any tax deducted from it.  It may also show an estimate for the total pension this tax year and any tax on it.