Help with Self Assessment after receiving pension lump sums whilst still working.

mickym · 12 December 2019 at 1:10AM

Hi,

i am wondering if I could get some advice.

A relative (who has passed retirement age and is still working full time) has been requested by HMRC to complete Self Assessment for 2018-19. During this time they claimed lump sums from their pension pots from multiple pensions they have built up over many years.

Pension A - Lump sum taken out, leaving a remaining amount to pay a monthly payment going forward. We have a P60 for the monthly payments for 2018-19, but not for the lump sum. We are chasing info on this to see what tax was paid on that lump sum from the pension admin company.

Pension B - Lump sum taken out, but leaves pot empty so no more future payments.

Pension C - No lump sum taken, and pays out monthly payment.

Pension D - State pension that gives monthly payment.

I am assisting them with the SA, and trying to work out the total gross amount paid via these pensions, and also the tax paid on them.

With regards Pension B, they received their lump sum as two payments into their bank.
Payment 1 - A tax free amount (25% of the total pension pot)
Payment 2 - The remaining amount after tax (I'm presuming income tax).

The pension company for Pension B sent documentation that outlines how their lump sum has been calculated, they also included a P45 too. For some reason, this P45 doesn't include the tax free amount that was made in Payment 1 of the lump sum into the tax calculation. Now, I'm presuming this is because it was 'tax free', however, I'm trying to find out do I still have to declare this tax free amount in the total gross pension income for the year field in the SA form?

I would appreciate any help!

Thanks

Dazed_and_confused · 12 December 2019 at 1:24AM

Pension A - Lump sum taken out, leaving a remaining amount to pay a monthly payment going forward.

With regards Pension A, they received their lump sum as two payments into their bank.

Payment 1 - A tax free amount (25% of the total pension pot)
Payment 2 - The remaining amount after tax (I'm presuming income tax).

The pension company sent documentation that outlines how their lump sum has been calculated, they also included a P45 too. On this P45, it doesnt show the total amount of the lump sum... only the post tax free figure, and the tax paid on that.

I am trying to find out what figure I need to enter in the HMRC form for Gross pension income.... Do I include the whole lump sum amount, or the post tax free amount that is displayed on the P45?

Firstly, as the remaining amount was to pay a monthly amount going forward do you know why a P45 was issued?

Do you know what the purpose of a P45 is?

Do you know what the purpose of a Self Assessment return is?

molerat · 12 December 2019 at 10:12AM

I think they may be confusing pensions A and B.

mickym · 12 December 2019 at 2:18PM

molerat wrote: »

I think they may be confusing pensions A and B.

I may of done . :doh: (it was late in the evening when i originally posted. Will check and reply back)

mickym · 13 December 2019 at 1:22PM

@molerat @Dazed and confused

I have updated my original post with more accurate details.

As for:

Do you know what the purpose of a P45 is?

I am presuming because that pension pot is being emptied completely.

Do you know what the purpose of a Self Assessment return is?

Looking at the SA notes, they say that someone may need to complete a SA if their annual income is over £100,000. This is likely in this case due to the lump payouts along with the person still working their normal salary.

Dazed_and_confused · 13 December 2019 at 1:34PM

The reason for those questions was in response to this question from your original post.

The pension company for Pension B sent documentation that outlines how their lump sum has been calculated, they also included a P45 too. For some reason, this P45 doesn't include the tax free amount that was made in Payment 1 of the lump sum into the tax calculation. Now, I'm presuming this is because it was 'tax free', however, I'm trying to find out do I still have to declare this tax free amount in the total gross pension income for the year field in the SA form?

Lets put it another way, do you know what type of income an employer or pension payer would report on a P45?

mickym · 13 December 2019 at 4:53PM

Dazed_and_confused wrote: »

The reason for those questions was in response to this question from your original post.

Lets put it another way, do you know what type of income an employer or pension payer would report on a P45?

Pardon my ignorance here, but not sure what you mean?

I only know a P45 as a document for those ending employment with an employer, with it showing how much money has been earned during that tax year with them.

Its the first time I've dealt with pensions like this to be honest, and the first time ive ever encountered a P45 being issued for a Pension payout. Im presuming its because it works in a similar way with employment, its to outline what pension payout has been paid to this person during that tax year?

Dazed_and_confused · 13 December 2019 at 4:57PM

A Self Assessment return is used to establish the tax due/repayable for a specific tax year.

A P45 is used by an employer/pension payer to report details of taxable income received (where the employment or pension ended before the end of the tax year).

Just put taxable income on the tax return.

If you choose to enter non taxable income on it then it will become taxable as HMRC assume you only enter details of taxable income.

mickym · 16 December 2019 at 12:44PM

Brilliant thank you

Help with Self Assessment after receiving pension lump sums whilst still working.

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