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bigduckontax
bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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I just received some compensation as a result of a claim

Customer Question

Hi
I just received some compensation as a result of a claim against a previous employer.
The cash is in respect of pension which was adversely affected when tupd'd to a new company.
I Retired and started receiving pension in 2012.
I need to know if this cash compensation is taxable and if so at what rate.
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to assist you with your question. I incline to the view that if this compensation is to correct a pension pot pursuant to an error following a TUPE transfer, providing it is added to the pot, would avoid tax altogether. Of course, any additional pension paid following the addition to the pot would be subject to Income Tax in the usual way. In any event 25% of a pension pot can be drawn free of taxation. I do hope that my reply is of assistance.
Customer: replied 1 year ago.
So as I'm already drawing my pensions, One final salary pension from that company and a defined contribution one from the new company, what can I physically do with the cash £39,000?
How do I put it into a 'pension pot, ?
If it's in a pension pot, can I draw down over a few years , and would that then be taxable as income?
Expert:  bigduckontax replied 1 year ago.
Easy solution is to pay and vest in an new private pension. A stakeholder would probably be the cheapest, but that is only an opinion as I am not licenced to give detailed pensions advice.
Depending on the amount drawn down some of it may be taxable. It's all the juggle round the 25% tax free element.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3371
Experience: FCCA FCMA CGMA ACIS
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 1 year ago.
Thank you for your support.
Customer: replied 1 year ago.
So when do I need to pay the tax on this amount?
I.e. Can I invest it say in premium bonds until I have to pay the tax due.
Expert:  bigduckontax replied 1 year ago.
Great idea, I do that sort of thing and await my million quid prize money with anticipation, this month I netted 3 25 pound ones!
Customer: replied 1 year ago.
So when will I need to pay the tax.
I don't normally do a tax return so am a little out of date about process
Expert:  bigduckontax replied 1 year ago.
You make a self assessment tax return after the end of each tax year (5 April). If you have no income which has not been taxed at source there is no requirement to make a return unless HMRC so request. Any tax and National Insurance due will be notified to you on HMRC's receipt of the return and is payable by 31 January.
Customer: replied 1 year ago.
Thanks
Expert:  bigduckontax replied 1 year ago.
Delighted to have been of assistance.

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