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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4348
Experience:  FCCA FCMA CGMA ACIS
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I have recently decided to retire and have received a new tax

Customer Question

I have recently decided to retire and have received a new tax code DO for 6th April 2015 - 5th April 2016 which means I will have to pay tax at the rate of 40% on my income from any of my private pensions including a Lump sum payment as I had put off retiring and worked on a further year beyond my original retirement date 7th Aug 2014 . My salary during this period was £30,000 . Can you advise if this Tax code is correct
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the experts on Juat Answer, and pleased to ba able to help you with your question. Well, it might be or it might not, it's as long as the proverbial piece of string! It all depends upon your earnings for tax in the current year which I assume includes the lump sum. This may have pushed you into higher tax brackets for the year. On an income of 30K you would normally be well within the basic rate band, but a taxable lump sum may have pushed it up somewhat into the 40% band. The normal treatment on retirement is for HMRC to issue a tax code to your pension provider, usually the biggest financially, and then other codes to other sources of income to collect tax due still attempting, as PAYE does, to make you tax neutral at the year end. I suspect that in your case the lump sum has thrown a spanner in the works. At this stage you have to sit down with a wet towel round your head and the backs of lots of envelopes to try to calculate if this is indeed the case. If it is there is not much you can do about it until you do your annual self assessment next April. If, however, these codes are manifestly incorrect you can write a letter to HMRC pointing this out and get the code(s) altered. I do hope that I have helped shed some light on your possible position.