Do I have to pay tax on a pension I've cashed in if I am a non-taxpayer?

admin
18 July 2016

Q

I have just cashed in an old pension, which was worth less than £2,000. I only earn around £4,500 a year. I noticed that I have paid tax on the pension withdrawal. Will I get this back or do I have to claim it back myself as a non-taxpayer?

From
VB/Huddersfield

A

The first 25% of the payout of your pension will be tax-free. The remaining 75% will be taxed at the basic rate of tax at 20%. Your pension scheme or provider will pay the cash and take off tax in advance through the PAYE (Pay As You Earn) system as if the pension was paid as employment income.

 

Your personal allowance (£11,000 in this tax year) will cover your total income. This means you will have paid too much tax. You should claim this back by either completing a self-assessment tax return or phoning up HMRC and asking it to repay the tax to you.

You will need a P60 from your pension provider, your national insurance number and details of your other income to do this.

 

While you are on the phone to the HMRC, ask about previous years to see if there is any tax owing to you and ask for this to be paid back too.