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My answer is different. Your accountant is wrong. Take a look under the heading "Tax on your lump-sum payment" on page 26 of the document here.
It clearly and categorically states that the tax rate that is applied to your lump sum is determined by working out the top tax rate that is paid on your other income in the same tax year, ie the state pension lump sum is excluded.
You were correct to tell the tax office that your top tax rate is 20%. There will be no more tax to pay on the state pension lump sum other than what was deducted at source.
I hope this helps but let me know if you have any further questions.
sirs, I have received a reply at time 6.18 / 6.43 / 7.o5, I am still unclear I have the option under dwp guidelines to repay these monies within 3 months of my drawdown, I am still within that period. am I correct the lump sum I have received after tax will be added to my other earnings for the year even though I have already had paid 20% tax at source . am I write to assume that with the figures I have. given inclusive of my earnings and the lump some I've received that I will pay a portion of £20000 at 40% tax if this is the case I would be better off to repay the lump sum and to accept an enhanced pension that woud still keep me in the 20% tax bracket
I am so pleased that you can repay part of your lump sum within that time frame and thus reduce you possible liability. The fact that the payment has been taxed at source merely means that when it is added to your income for the relevant year you will already have paid tax on it. It is rather like receiving interest from a building society with tax already deducted. The effect is exactly the same.
I would suggest that it might be advantageous to return the lump sum and accept the enhanced pension in lieu. The Pension Service love that if you do and drop dead the next day [joke], but it is something to be considered when making the decision as to which way the cat should jump. My Father didn't get that choice, he got up from the breakfast table and was dead before he hit the floor at age 63.