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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15916
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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l have a pension with a value of £27500 and been adviced by

Customer Question

l have a pension with a value of £27500 and been adviced by Scottish Widdows that l will pay £7735 on the pension if l cash it in .As l have a income of £18150 per year ,it will take me over the £42385 before l take my 25%off. This because HMRC have given these intruction to Scottish Widdows. l am 70 years old and pay tax on my 1st penion, will l be able to claim the tax over charged at the end of this year?, thank you.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

Hi.

Can you tell me if your income of £18,150 is a salary or an occupational pension or income from self-employment please.

Customer: replied 2 years ago.

ltis made up of £19130 state pension plus private pension of £9019

Expert:  TonyTax replied 2 years ago.

Thanks.

I don't see how Scottish Widows can take off £7,735 in tax. As you said, you will get 25% of the value of the fund tax free. You might ask Scottish Widows how they arrive at their tax figure.

If I were you, I'd call the tax office and ask for the matter to be looked into before you instruct Scottish Widows to make the payout. Given that the new pension encashment rules have just started, there are bound to be teething problems.

If you go ahead and you do suffer what appears to be an excessive tax charge, you can make a claim for an in-year tax repayment on a form P50 or P50Z which you can find here but only if you are not receiving an occupational pension or in the case of the P50, you have not cashed in the whole pension. You are receiving a private pension which is not an occupational pension but it would be worth checking with the tax office if you can use the P50 or P50Z.

If you cannot use the P50 or P50Z, you will have to wait until the end of the current tax year to reclaim any excess tax deduction unfortunately or have your pension provider make it to you which seems like a forlorn hope given what you have been told by Scottish Widows.

I hope this helps but let me know if you have any further questions.

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Expert:  TonyTax replied 2 years ago.

Hi again.

Thanks for accepting my answer. I think the form you will need will be the P53Z which you can find here.

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