- Home
-
Tax News
- Budgets and Autumn Statements
- Income Tax
- Business Tax
- PAYE and Payroll Taxes, National Insurance, NICs
- Company Taxation
- Savings & Investments, Pensions & Retirement
- Capital Gains Tax, CGT
- Property Taxation
- Inheritance Tax, IHT, Trusts & Estates, Capital Taxes
- Tax Investigations & Enquiries
- VAT & Excise Duties
- Stamp Duty, Stamp Duty Land Tax, SDLT
- International Tax
- HMRC Administration, Practice and Methods
- Professionals in Practice & Industry
- General
- TaxationWeb
-
Tax Articles
- Budgets and Autumn Statements
- Income Tax
- Business Tax
- PAYE and Payroll Taxes, National Insurance, NICs
- Company Taxation
- Savings and Investments, Pensions and Retirement
- Capital Gains Tax, CGT
- Property Taxation
- Inheritance Tax, IHT, Trusts & Estates, Capital Taxes
- Tax Investigations & Enquiries
- VAT & Excise Duties
- Stamp Duty, Stamp Duty Land Tax, SDLT
- International Tax
- HMRC Administration, Practice & Methods
- Professionals in Practice & Industry
- General
- Tax Tips
-
Tax Forum
- Income Tax
- Business Tax
- PAYE and Payroll Taxes, National Insurance, NICs
- Company Taxation
- Savings & Investments, Pensions & Retirement
- Capital Gains Tax, CGT
- Property Taxation
- Inheritance Tax, IHT, Trusts & Estates, Capital Taxes
- Tax Investigations and Enquiries
- VAT & Excise Duties
- Stamp Duty, Stamp Duty Land Tax, SDLT
- International Tax
- HMRC Administration, Practices & Methods
- Professionals in Practice & Industry
- General
- Tax Jobs
- Get in Touch
Where Taxpayers and Advisers Meet
Tax on pension lump sum
I recently took the full 25% tax free lump sum from my pension plus an additional sum of £17,709, an amount that took my taxable income for the year up to but not above the 40% threshold. However, the tax deducted from this was £6,347.25, a 35.8% tax rate not the 20% I was expecting. Could somebody explain why the tax charged is so high. The tax code applied to the payment was 1257LM1 if that's relevant. Any help will be much appreciated. Thanks.
Re: Tax on pension lump sum
For the first payment the pension company usually has to use the emergency tax code (1257L).
On such a large payment a mix of 0%, 20%, 40% and 45% would have been deducted. Which is perfectly normal.
If you complete a Self Assessment return it will all come out in wash when you file your return.
If you don't need to file a return then HMRC will refund any excess tax when they review the 2024/25 tax year later this summer.
Or if you are keen to get a provisional refund pension HMRC's annual review you can probably find a suitable repayment claim form on gov.uk. But you don't need to do that.
On such a large payment a mix of 0%, 20%, 40% and 45% would have been deducted. Which is perfectly normal.
If you complete a Self Assessment return it will all come out in wash when you file your return.
If you don't need to file a return then HMRC will refund any excess tax when they review the 2024/25 tax year later this summer.
Or if you are keen to get a provisional refund pension HMRC's annual review you can probably find a suitable repayment claim form on gov.uk. But you don't need to do that.