Withdrawing lump sum in same year as gaining tax relief

davefrombristol

I have a tax code change taking me to K1223X I'm sure you know thats minus £12,230.

Under deductions it lists the full years state pension £12,547 as income. I rang HMRC after 2 hrs they told me it was DWP to blame, I rang them another 1 hr, they blamed HMRC, neither tried to say it was correct btw, on top of that they also took National Insurance payments after state pension age had passed and will no doubt keep taking them.

This was the final straw so I have told my employer that I'm calling it a day and want out

davefrombristol

All I want to do is try and legally claim as much tax relief as I'm allowed to in the remaining few months that I work ! have not used up this years allowance I should be able to make contributions of around £15 to 20 thousand

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/82180972#Comment_82180972

That is correct as far as the State Pension is concerned. No idea why HMRC suggested you contact DWP as it's got nothing to do with them.

DWP simply tell HMRC what your weekly award is.

You are wasting your time, and everyone else's, trying to question this. It has worked like that for as long as I can remember and is correct. You just need to do the maths to understand it.

molerat

Adding the whole year amount then using the X suffix means they only look at each single pay period so use 1/12th of that £12570 per month, you are not being taxed on a full year pension.

DRS1

Have you mentioned to your employer that you have hit SPA and shouldn't be paying NICs any more?

This page suggests you may be able to claim any overpaid NICs back (as well as suggesting what you might do to prove you have hit SPA to your employer)

National Insurance and tax after State Pension age: Stop paying National Insurance - GOV.UK

af1963

Going back to the original question …

I'm not seeing the reasoning behind the suggested transactions. If you're expecting to need to use the full £1k + £5k bands for interest, that implies you have a fairly substantial amount in cash investments outside the pension. Over £100k to generate £6k of interest. So why not dip into that next year?

However, doing it the way you plan, pension recycling rules were mentioned. There's a useful flowchart here :-

https://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/recycling-of-tax-free-cash/

From that: if the amount of TAX FREE CASH taken is under £7500, recycling hasn't happened. Your plan seems to involve taking £20k total, with £5k tax free cash included. So you wouldn't breach the recycling rules. ( EDIT - although you'd also need to consider this when looking at future TFC withdrawals over the following couple of tax years)