Underpayment of Tax on Small Pot

bonnyrigger

I just took the whole of a 6k small SIPP with AJ Bell (1.5k Tax free, 4.5k taxable), but they only charged a tax rate of about 16.36% on the taxable bit. I'm assuming this is because they don't know about my other pensions. Will HMRC automatically adjust my tax code with my largest regular pension to fix this? I should have been charged a mixture of 20 and 21% on this payment.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6665217/underpayment-of-tax-on-small-pot

Presumably you didn't ask for it to be paid out under the "small pot" rules, as 20% tax should have been deducted if you had.

Was the emergency tax code, 1257L, used?

But irrespective of that, yes, you can expect an adjustment to your tax code at some point to collect any underpaid tax.

bonnyrigger

You're right, they paid it as UFPLS - I didn't bother with the small pots form as I'm not going near the overall limit anyway. Thanks for the info, I suspected they would just adjust the tax code at some point.

ali_bear

In my experience with small pots taken under the small pots rule they use the BR tax code.

kempiejon

https://forums.moneysavingexpert.com/discussion/comment/81972847#Comment_81972847

If you want to leave the funds with HMRC they'll adjust your tax code when they get round to it. Or if you have an online tax account or get one you can make a claim and it get it within a month or two.

https://www.gov.uk/guidance/claim-back-tax-on-a-flexibly-accessed-pension-overpayment-p55

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81973002#Comment_81973002

It's a bit of extra tax owed in this case, not a tax refund.

kempiejon

@Dazed_and_C0nfused Ah I missed the nuance, of big bold title underpayment. I thought we were after reclaiming the BR.

DRS1

Foolish question perhaps but if this was the first payment from a pension the payer would have used the emergency code and then HMRC would issue a proper tax code for later payments from that pension. But there won't be any. The OP is thinking HMRC may change an existing tax code on another source of income to collect the missing tax but how likely is that? Wouldn't it be more likely to be mopped up in some end of year calculation?

Marcon

Foolish question perhaps but if this was the first payment from a pension the payer would have used the emergency code and then HMRC would issue a proper tax code for later payments from that pension. 

Not when the whole amount has been taken. The provider will have reported it appropriately.

The OP is thinking HMRC may change an existing tax code on another source of income to collect the missing tax but how likely is that?

https://www.gov.uk/tax-overpayments-and-underpayments/if-you-owe-tax#:~:text=HM%20Revenue%20and%20Customs%20(%20HMRC,This%20happens%20automatically%20if%20you: