Income tax query

T

TitanTim

Elite
Hi all

Is anyone knowledgeable on income tax please, I'm hopeless :oops: even more so after seemingly going round in circles on the HMRC website :cry:

My employers pension providers contacted me yesterday just to let me know I will be receiving my retirement grant lump sum in the next few days which will be tax free. However as its over a month late in payment I will receive an additional £300 which I think is basically the interest accrued on top. They have informed me I may need to declare the additional £300 to the HMRC as its a taxable additional income. I've been on the .Gov website for the HMRC and looked at the income self assessment but it's not the easiest to follow, seems more geared for the self employed for doing tax returns. I did an online self assessment which seems to suggest I won't need to declare the extra amount of money as its for a small amount. Just unsure to be honest.

Any thoughts gratefully received.

Tim.
 
I think you just have to put it down on your self assessment tax return next year after April 5th for 2023/24
 
Chippie said:
I think you just have to put it down on your self assessment tax return next year after April 5th for 2023/24
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Thanks for that, yes I saw that advice on their website but as my only only yearly income will be my workplace pension where any tax will have already been taken out each month the 300 quid will be the only additional income over and above my pension so I'm unsure it would go over any additional income threshold :? Unsure. Only concern with anything like this is the tax IF payable would only be a small amount on 300 quid but if HMRC come back in a few years and say I should have paid 50 quid in tax but the interest is now 300 quid as I didn't declare it :lol:

Tim.
 
Your workplace pension probably uses all your personal allowance so anything over that, any additional income should be declared and the tax paid, they will either alter your tax code for the next year or send you a payment notice.
 
You could try ringing the tax office for help but the last time I did it took me almost 2 hours to get through :headbang:
 
If it is interest (I would argue with the tax office that it is interest on savings that I would have had if I had been paid the lump sum on time), then there is a savings interest allowance of £5,000 that you can earn tax free.

The £5,000 allowance sits on top of your personal allowance, so if your income is less that £12,570 you have the full £5,000 allowance. You lose a pound for every pound your income is over £12,570, so that if your income is £17,570 or more, the allowance is all gone.

The £300 interest should therefore be tax free if your income is less than £17,270, so long as you are not earning any other interest. Bear in mind you will probably be earning a bunch of interest on your lump sum, unless you spend it on something or invest it for dividends.

Best thing to do is spend it on a new Z4 (p.s. this is not financial advice!) :D
 
MikeyH said:
You could try ringing the tax office for help but the last time I did it took me almost 2 hours to get through :headbang:
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Thanks Mikey, there is or was a dicussion forum on the HMRC site where you can post queries but was having problems last night registering for some reason so unsure its still active. I have to say the .Gov website is not the easiest to navigate and trawl through the endless links and then wandering if your using the correct link, all pretty frustrating :cry:

Tim.
 
Zedebee said:
If it is interest (I would argue with the tax office that it is interest on savings that I would have had if I had been paid the lump sum on time), then there is a savings interest allowance of £5,000 that you can earn tax free.

The £5,000 allowance sits on top of your personal allowance, so if your income is less that £12,570 you have the full £5,000 allowance. You lose a pound for every pound your income is over £12,570, so that if your income is £17,570 or more, the allowance is all gone.

The £300 interest should therefore be tax free if your income is less than £17,270, so long as you are not earning any other interest. Bear in mind you will probably be earning a bunch of interest on your lump sum, unless you spend it on something or invest it for dividends.

Best thing to do is spend it on a new Z4 (p.s. this is not financial advice!) :D
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Thanks for the info :thumbsup: Yes the £300 is interest thats being paid to me as a result of my lumpsum grant being paid late. The remainder of my annual pension is more than my personal allowance but I won't need to worry about the tax side of it as it will be taken out before my monthly pension is paid to me. The tax free lump sum for the moment I was just going to deposit into a savings account, I'm pretty certain all of my total savings including the pension lump sum won't command more than 5k in interest.

I did have a private pension with Aviva which I stopped paying into way back in 1998 and it's just been sitting there so decided in March to cash it in as a lumpsum, it's value wasn't worth having it as a draw down so just decided to take it all as a cash lumpsum so was stung for £5400 in tax :x It might have been more prudent to have cashed it in a little at a time maybe.

It really doesn't encourage you to save for later life over and above a workplace pension as the money is just taken away from you in tax, like you say just better spending it or at least spend some of it on a new motor before the taxman gets their hands on it.

Tim.
 
TitanTim said:
It really doesn't encourage you to save for later life over and above a workplace pension as the money is just taken away from you in tax, like you say just better spending it or at least spend some of it on a new motor before the taxman gets their hands on it.

Tim.
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It’s worth getting professional tax advice or even just a good understanding of the tax system when you approach retirement, as a good tax strategy can save you literally thousands. Getting taxed on money that you’ve saved is always a painful experience :x
 
Zedebee said:
TitanTim said:
It really doesn't encourage you to save for later life over and above a workplace pension as the money is just taken away from you in tax, like you say just better spending it or at least spend some of it on a new motor before the taxman gets their hands on it.

Tim.
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It’s worth getting professional tax advice or even just a good understanding of the tax system when you approach retirement, as a good tax strategy can save you literally thousands. Getting taxed on money that you’ve saved is always a painful experience :x
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I might be wrong but it's probably more important if say you have private pensions of which I had a small one, my main workplace pension is a local government pension which I've had all my working life so the tax side of things has already been taken into account.

In terms of savings my take on it is save a little and spend more so long as you have the savings in the first place :)

Tim.
 
If you are in the basic income tax band you also get a £1,000 "personal savings allowance" (on top of the £5,000 spoken of here which is known as the "starting rate for savings") - so unless interest from all sources exceeds £1,000 you won't pay any tax on that. If you are in the higher tax band it drops to £500.
 
Vornwend said:
If you are in the basic income tax band you also get a £1,000 "personal savings allowance" (on top of the £5,000 spoken of here which is known as the "starting rate for savings") - so unless interest from all sources exceeds £1,000 you won't pay any tax on that. If you are in the higher tax band it drops to £500.
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Thanks Vornwend thats really useful :thumbsup: I fall into the basic income tax band and looking at my personal savings allowance etc any interest won't exceed the limit so looks like all is well. :)

Tim.
 
I wouldn’t sweat over a £300 payment, and anyway it’s interest on a late tax free lump sum so it should be tax free also. Quite honestly Tim, HMRC have bigger fish to fry!

I have in the past ignored such issues for amounts larger than this hoping they would disappear, which they did 😊 (did I say that out loud…..???)
 
dr_john said:
I wouldn’t sweat over a £300 payment, and anyway it’s interest on a late tax free lump sum so it should be tax free also. Quite honestly Tim, HMRC have bigger fish to fry!

I have in the past ignored such issues for amounts larger than this hoping they would disappear, which they did 😊 (did I say that out loud…..???)
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Thanks John, yes your probably right and worrying about nothing really :roll: I've never really had anything to do Tax, did my day job and taxes were squirelled away before the payslip arrived so never gave it a second thought.

I remember my dad once having a tax demand and that was him working in the police then retired and then went into Local Government and he received a tax demand for underpayment. Tried to argue it was him employers error and not his but HMRC were having non of it and demanded the money so had to pay up :x

Tim.
 
MikeyH said:
You could try ringing the tax office for help but the last time I did it took me almost 2 hours to get through :headbang:
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Officially closed down for the summer due to skiving workers
 
pvr said:
MikeyH said:
You could try ringing the tax office for help but the last time I did it took me almost 2 hours to get through :headbang:
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Officially closed down for the summer due to skiving workers
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More likely partying, oh hang on different Government department :roll:

Tim.
 
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