# Self-Assessment



## listerdiesel (Aug 3, 2012)

HMRC do some strange things.

Doing our returns online, I noticed that Rita had acquired a second employer, called 'Pension Lump Sum', with the amount paid and tax deducted.

Not seen that before and it wasn't filed by me, that was in there when I opened the session.

When it came to the tax calculation, it wanted £22k, which was to say the least a bit of a surprise.

Working back, I decided that it shouldn't have been in employment at all, and deleted that employment, then put the figures into the correct Pension Lump Sum section, with the tax deducted.

Long story short: State Pension Lump Sum amounts are taxed at your current tax rate, NOT by the amount. What was happening was that the calculation for tax was worked out at the higher rate tax band as the lump sum put it up there, whereas it should have been taxed at her 20% rate (we don't get paid that much!)

Once that was done we had a demand for £152.20, which was far more to our liking.

The taxing of State Pension lump sums is not known by everyone, although the DWP will go through it in detail if you ask them. 

Peter


----------



## Kaytutt (Feb 5, 2013)

That’s interesting, I didn’t know you could take a lump sum from your state pension. I’ll google for more info. Thanks


----------



## Pudsey_Bear (Sep 25, 2008)

I get pension credit which is means tested, if we have more than £10k (yes please) in the bank we lose benefit, we were supposed to have a review over the phone 29/12/17, no one rang, got a letter last week to ring to make an appointment to do the review, they are now sending a form, all this farting about because of a NI screw up back in the 70's, compounded by Liz having to work extra years as she misses the cock up cut of time.


----------



## uzer_nayme (Jan 15, 2018)

Following on from Perter's experience this may be of interest.

I filed my return on-line this year as the post from Poland did not get my paper return to HMRC before the 31st Oct deadline.

After I had finished I went to my Statement to find out what I am due to pay on 31st Jan (combination of balance for year 2016-17 and first payment for 2017-18. The sum was about 3 times what I expected, so I range them. They explained that the two systems do not talk to each other and they could not give the correct figure until 3-4 days later when they had processed my return.

Sure enough the figure I then received was about the amount I expected to pay.

I just thought this info my be useful for some people.

Filing on-line is a faff, but I am often delayed for the paper one by not receiving P60s from my pension providers. I have now found out they will give figures over the phone, which surprised me, so I will do that this year and have the return in by end of April or early May.

Geoff (Nicholson - VS still have not fixed my Avatar despite 2 Reports)


----------



## listerdiesel (Aug 3, 2012)

Kaytutt said:


> That's interesting, I didn't know you could take a lump sum from your state pension. I'll google for more info. Thanks


Kay:

Rita's circumstances may be different to yours:

At retirement age she chose (as I did) to defer taking her pension and put it on deferment, which means that the payments are put into an account for you and there is a small interest amount added.

She was working for and being paid by the company, paying normal income tax.

The lump sum withdrawal is available, you pay tax at whatever rate you currently pay at, regardless of the lump sum total, and if you want to continue with deferment then you can do it one more time, after which you have to commence taking your pension proper.

The mechanics of the process are not well known, but if you don't need to take your pension at retirement age, deferment is a good option, especially given the better tax treatment.

Peter


----------



## uzer_nayme (Jan 15, 2018)

listerdiesel said:


> Kay:
> 
> The lump sum withdrawal is available, you pay tax at whatever rate you currently pay at, regardless of the lump sum total, and if you want to continue with deferment then you can do it one more time, after which you have to commence taking your pension proper.
> 
> ...


I deferred mine for six years as I was working enough to live from with no mortgage, and with indexing increases and the, then 10.4% p.a. increase(now 5,2%?), I doubled my State pension. of course one foregoes some money but net of tax is not so much, and I calculate that it will take 5-5.5 years to recoup, but it has been 4.5 years now so not long to go then I wll be quids in as I am drawing £11,000p.a.:grin2:

Geoff Nicholson


----------



## listerdiesel (Aug 3, 2012)

The other thing that I didn't mention is that you have to take one month's pension before deferring for the second period. That tripped us up on the Self Assessment as it was gross, so we had to pay tax on it, paid as it was at the start of the tax year where no tax would have been deducted on monthly earnings.

Peter


----------

