Tax help please
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doolali
Posts: 9 Forumite
in Cutting tax
Hi
Until yesterday I was working full time and earning £13000 a year with the standard single persons tax allowance.
6 weeks ago I was traced by a company and following the death of my estranged husband awarded a pension of £22000 a year plus back payments on this to last july.
I was awarded a back payment of £18000 last week and on that I have been taxed £6414 !!! I am also going to be paying £276 on my monthly pension.
Is that tax amount right ? Also now that I have given up work, will I be able to have my allowance moved on to my pension as that will be my only income and what are the chances of having some of my £6414 tax refunded?
Sorry for so many questions, but I am very confused
thanks in advance
Until yesterday I was working full time and earning £13000 a year with the standard single persons tax allowance.
6 weeks ago I was traced by a company and following the death of my estranged husband awarded a pension of £22000 a year plus back payments on this to last july.
I was awarded a back payment of £18000 last week and on that I have been taxed £6414 !!! I am also going to be paying £276 on my monthly pension.
Is that tax amount right ? Also now that I have given up work, will I be able to have my allowance moved on to my pension as that will be my only income and what are the chances of having some of my £6414 tax refunded?
Sorry for so many questions, but I am very confused
thanks in advance
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Comments
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Hi
Until yesterday I was working full time and earning £13000 a year with the standard single persons tax allowance.
6 weeks ago I was traced by a company and following the death of my estranged husband awarded a pension of £22000 a year plus back payments on this to last july.
I was awarded a back payment of £18000 last week and on that I have been taxed £6414 !!! I am also going to be paying £276 on my monthly pension.
The £276 per month tax is correct as far as the £22,000 per year is concerned. However the £18,000 back pay plus the £22,000 will give you a total income of £40,000 for this year which makes the real monthly tax £452.92.Is that tax amount right ? Also now that I have given up work, will I be able to have my allowance moved on to my pension as that will be my only income and what are the chances of having some of my £6414 tax refunded?
The way PAYE works it assumes that what you were paid last week will be your normal monthky income and taxes you accordingly. Based on that your tax was correct. Of course over the year it won't be correct and over the next few months it will adjust itself and you will get the overtax rebated so that by the end of the tax year it will be correct.
Your tax code should now be applied to your pension if you are no longer working. You need to discuss this with HMRC.0 -
I find it all very confusing. Does this mean that my tax on my pension will now go down to compensate for the huge amount of tax they have taken ?0
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You will probably end up with a tax rebate each month as your tax adjusts itself.0
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If you have invested the lump sum back pay, then also make sure you use your ISA allowance for this year. (if not already done so)
This will help to minimise any potential 40% liability when your taxable interest is added to your total income for the current year.Official DFW Nerd Club - Member no: 203.0 -
On the subject of applying the statutory accruals basis of tax to pension arrears. I have requested that HMRC apply the statutory accruals basis (as per HMRC manual EIM74101 / SAM121160) to a large lump sum that I received last year that represents pension arrears dating back over the past 4 years. HMRC are saying that I must pay interest on the unpaid tax (dating back as far as 4 years) which effective nullifies the benefit of applying the accruals basis to my pension arrears.
I would be very grateful if someone could clarify whether HMRC can legally require that interest is paid in such cases.0
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