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Posted Tue, 22 Feb 2022 14:07:24 GMT by GAZCHRISW
I took my private pension during my self employment tax year and took a 25% tax free lump sum with the corresponding monthly pension payments which were paid tax free, I understand my monthly payments should be declared as untaxed income, does the lump sum need to be declared on my self assessment tax return as it was tax free.
Posted Wed, 23 Feb 2022 10:27:37 GMT by HMRC Admin 17

If the lump sum was not taxable it would not need to be declared.

Thank you.
Posted Thu, 24 Feb 2022 10:55:19 GMT by GAZCHRISW
Thank you for your reply, if I could post a relevant second question on the same topic, I took a refund 'Trivial Commutation' of a second small private pension to provide a lump sum to start my business, the P45 given with the refund shows total pay £23850, total tax deducted £4770, as I have made a loss in my first year, should I be entitled to an automatic refund of the £4770 tax deducted, should I be entering the £23850 as employed income or the gross amount of £28620.
Posted Tue, 01 Mar 2022 09:03:47 GMT by HMRC Admin 19

You woould enter the amount of the lump sum and tax paid under the pension section of your return and any refund due will automatically be calculated.

You would enter the gross amount and then enter the tax paid. 

Thank you.
Posted Fri, 04 Mar 2022 12:50:12 GMT by quinny Quinn
I want to retire this year. My income will drop to £13,000 PA. I will also get a tax free lump sum. As I have 2 children at University next year, will it be included in the calculation of their maintenance loan?
Posted Fri, 04 Mar 2022 13:27:23 GMT by HMRC Admin 19

Sorry, we can only answer questions appropriate to HMRC on this forum.

Thank you.
Posted Thu, 18 Aug 2022 07:49:24 GMT by LogieB
I took a lump sum from a private pension in 2010. I declared the payment on my 2010 return but didn't send in the P45 the pension company sent me to HMRC. That has been rectified now. However, new this year on my Income Tax estimate is a 5 figure income estimate attributed to fictitious employment with the pensions company's administration company! The P45 has been processed now, but the confusion between the pension company and it's administrator remain - as does the large tax estimate - at least on my account. HMRC advisors insist that I will not be asked to pay this income tax estimate but it seems it can't be removed from my account. Why is this? Are tax estimates only done once year? (An estimate on income tax from a disused PAYE account has also appeared this tax year - and again advisors tell me this can be ignored as I wont have to pay anything (I retired in 2017). Is this the fault of a new AI computer or a new policy aimed at clearing up legacy tax claims? I thought there was a 4 year limit anyway. Maybe I need to declare some actual earnings to replace the old estimates.
Posted Mon, 22 Aug 2022 09:37:39 GMT by LogieB
I have recently received a letter from the pension provider that paid me the lump sum in 2010. It explains how the cash sum was calculated, which appears to differ from the 2010 P45 "total pay". Also notes I added to my 2010 Tax return about the lump cash sum appear not to have been recorded in my official IR record for that tax year. I have sent the P45 now, and it has been worked on, I'll now send the recent explanatory letter from Rothersay. With luck this should clear the incorrect tax estimate from my account. One thing puzzles me though, why are P45's, normally for employment, used to process Trivial cash sums? Surely, a better way is needed, that might also avoid confusing a pension company with their administrator - in this case, a separate company.
Posted Mon, 22 Aug 2022 10:58:17 GMT by HMRC Admin 19

When we do our end of year tax calculation, this would be done on the figure that is reported to us. If income figures are not being declared, they would not be included in the calculation.

If you are not receiving an income from this source, our helpline may be able to update your record to mark the source as ended.

Income Tax: general enquiries

Thank you.
Posted Tue, 23 Aug 2022 10:22:27 GMT by HMRC Admin 17

LogieB ,
P45s are used for both, they are not just tied to employment.

Thank you.
Posted Tue, 23 Aug 2022 10:29:50 GMT by LogieB
The helpline staff tried to "zero" out the PAYE estimate, but it always pops up again. These very recent and somewhat unlikely income estimates may stem from an AI system, trying a little too hard to find income. To try and explore in detail what the IR have on record, I applied for a SAR but it only resulted in a SAR Rejection notice. Fortunately, the Taxation Charity for Old People recognised my problem as a common one; caused by not sending the P45 for the lump sum. They had many similar cases where compound interest was added every month for years as the lump sum payment appeared as isolated income and not part of a pension commutation. Also, The persistence of these unlikely income tax estimates might suggest that the IR think fraud has occurred. To assist me, the pension company's admin team sent me a letter to pass on to the Inland Revenue explaining the calculations in detail (and that they paid the tax). I sent the pension administrator's letter, to the HMRC yesterday.

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