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bigduckontax, Accountant
Category: Tax
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In April this year I took advantage of the new pension freedom

Customer Question

In April this year I took advantage of the new pension freedom rules and cashed in a old policy amounting to just over £15.000.
25% came tax free. so I paid emergency tax on £11.581 amounting to £3.749. the normal 20% tax would come to something like £2.300. a difference of around £1.400.
So to claim back the difference I printed off a P53 , and filled it out. I was asked my annual employment income before tax . I put £24.100. I was also asked if i am drawing a pension, again yes . £7.386 RM . So my total yearly income comes to aprox £31.486.
So after waiting 3 months I finally get a letter last Saturday confirming that I have indeed paid to much tax and a rebate was on it`s way to my bank account.and that they would send me the figures outlining how they worked it out. also in the letter it explained that at the end of the tax year they will check that I have paid the right amount. and then they will contact me if they need to pay me more. or if indeed I must pay them back.
So on returning from work on Monday afternoon I logged into my bank account. expecting to see about £1.400 debited to me, I was staggered to see HMRC had paid me £3.600.
I still haven`t received the figures outlining how they came up with this. but the guys are saying HMRC rarely get these things wrong. I`m not so sure myself and it looks like I could be getting a rather large tax bill next April.
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.
Well, my personal view is that it is better in my account than HMRC's! HMRC are past masters at getting things wrong, they have been with me these last 20 years! HMRC are notorious for getting hold of the wrong end of the stick if they can even find the stick at all. They are also very keen to make assumptions, in my experience invariably wrong, and always in the Revenue's favour.
So what to do? Well my advice would be to place the surplus somewhere safe so when next April comes along and HMRC realise what a bog up they have made you have it ready to repay. That is what I have done on odd occasions when it has happened to me in the past.
I do hope that I have shown you a way forward in this matter.
Customer: replied 1 year ago.

Thank you. on a forum where I asked this same question someone mentioned that HMRC would assume that the lump sum on top of my wages was my normal monthly income.

I`m a little worried I may get hammered for a huge tax bill next April.

my own sums would indicate I may have to pay back something like £2.400.

Expert:  bigduckontax replied 1 year ago.
What I think you were told is that the PAYE system would make that assumption. It works on the principle that what you receive in a month will be about the same next month which, let's face is, is what happens to most of us wage slaves! If there is a sudden change it tends to go into wobble mode, but it is resilient and by the end of the tax year you should be tax neutral.
I did suggest that you put the money to one side ready to meet the unexpected bill in April. Remember, it is not actually payable until 31 January 2016 so if you stick it in say Premium Bonds and win the million tax free jackpot, well bully for you. All I've ever won is a thousand quid prize many years ago plus the odd minima!
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3609
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 1 year ago.
Thank you for your support.

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