Tax on inherited pensions
Discussion
Morning,
I can’t find any proper answers on Google and I don’t have a personal tax advisor. I’m PAYE although I do my own tax returns because I pay into a SIPP and I chase the extra tax relief.
As some of you may know my wife died in 2021. I’m still sorting through her pensions , mainly due to the complete incompetence of the two ex-employers I’ve been dealing with. Both related to local councils and governments.
I seem to be almost there but my question is regarding monthly tax payments for children on an inherited pension. There was one lump sum which should be coming to me tax free because it’s classed as out of her estate, but I’ve managed to get this to swerve me completely and get paid to my children’s existing in trust stocks and shares accounts with Hargreaves Lansdown. I didn’t want it to be part of my estate or be classed as a gift to the children. We will see if that really happens later this week.
Alongside this I and the two children will receive a monthly payment. The paperwork was received this morning, mine appears to be taxed which is correct. But theirs is showing a tax deduction too. Should they be paying tax? One is 16 and in full time education at college, the other is 13. I’ve been receiving another monthly pension from one of her other employers for over a year and that’s taxed too.
I want to correct it but also fear the length of time this will take given the slowness of the department’s I’m dealing with.
It’s a not huge numbers, but does show a tax deduction. Is that correct? Thank you
I can’t find any proper answers on Google and I don’t have a personal tax advisor. I’m PAYE although I do my own tax returns because I pay into a SIPP and I chase the extra tax relief.
As some of you may know my wife died in 2021. I’m still sorting through her pensions , mainly due to the complete incompetence of the two ex-employers I’ve been dealing with. Both related to local councils and governments.
I seem to be almost there but my question is regarding monthly tax payments for children on an inherited pension. There was one lump sum which should be coming to me tax free because it’s classed as out of her estate, but I’ve managed to get this to swerve me completely and get paid to my children’s existing in trust stocks and shares accounts with Hargreaves Lansdown. I didn’t want it to be part of my estate or be classed as a gift to the children. We will see if that really happens later this week.
Alongside this I and the two children will receive a monthly payment. The paperwork was received this morning, mine appears to be taxed which is correct. But theirs is showing a tax deduction too. Should they be paying tax? One is 16 and in full time education at college, the other is 13. I’ve been receiving another monthly pension from one of her other employers for over a year and that’s taxed too.
I want to correct it but also fear the length of time this will take given the slowness of the department’s I’m dealing with.
It’s a not huge numbers, but does show a tax deduction. Is that correct? Thank you
Edited by oldaudi on Saturday 7th January 12:30
oldaudi said:
Morning,
I can’t find any proper answers on Google and I don’t have a personal tax advisor. I’m PAYE although I do my own tax returns because I pay into a SIPP and I chase the extra tax relief.
As some of you may know my wife died in 2021. I’m still sorting through her pensions , mainly due to the complete incompetence of the two ex-employers I’ve been dealing with. Both related to local councils and governments.
I seem to be almost there but my question is regarding monthly tax payments for children on an inherited pension. There was one lump sum which should be coming to me tax free because it’s classed as out of her estate, but I’ve managed to get this to swerve me completely and get paid to my children’s existing in trust stocks and shares accounts with Hargreaves Lansdown. I didn’t want it to be part of my estate or be classed as a gift to the children. We will see if that really happens later this week.
Alongside this I and the two children will receive a monthly payment. The paperwork was received this morning, mine appears to be taxed which is correct. But theirs is showing a tax deduction too. Should they be paying tax? One is 16 and in full time education at college, the other is 13. I’ve been receiving another monthly pension from one of her other employers for over a year and that’s taxed too.
I want to correct it but also fear the length of time this will take given the slowness of the department’s I’m dealing with.
It’s a not huge numbers, but does show a tax deduction. Is that correct? Thank you
Hi old audi,I can’t find any proper answers on Google and I don’t have a personal tax advisor. I’m PAYE although I do my own tax returns because I pay into a SIPP and I chase the extra tax relief.
As some of you may know my wife died in 2021. I’m still sorting through her pensions , mainly due to the complete incompetence of the two ex-employers I’ve been dealing with. Both related to local councils and governments.
I seem to be almost there but my question is regarding monthly tax payments for children on an inherited pension. There was one lump sum which should be coming to me tax free because it’s classed as out of her estate, but I’ve managed to get this to swerve me completely and get paid to my children’s existing in trust stocks and shares accounts with Hargreaves Lansdown. I didn’t want it to be part of my estate or be classed as a gift to the children. We will see if that really happens later this week.
Alongside this I and the two children will receive a monthly payment. The paperwork was received this morning, mine appears to be taxed which is correct. But theirs is showing a tax deduction too. Should they be paying tax? One is 16 and in full time education at college, the other is 13. I’ve been receiving another monthly pension from one of her other employers for over a year and that’s taxed too.
I want to correct it but also fear the length of time this will take given the slowness of the department’s I’m dealing with.
It’s a not huge numbers, but does show a tax deduction. Is that correct? Thank you
Edited by oldaudi on Saturday 7th January 12:30
Sorry to hear this. If you copy your post to the aforementioned thread, i'm sure someone can give some guidance on this.
Regards
Adam
https://www.pistonheads.com/gassing/topic.asp?h=0&...
Some good info here: https://techzone.abrdn.com/public/pensions/Tech-gu...
Furthermore…
Children are treated as taxpayers from birth.
Of course, most minor children do not have any material income in their own names, but if they do, they would also have their own personal allowance (currently £12,570 pa).
I’m guessing that if they are going to be receiving a share of their late mother’s DB pension income, it will be ‘taxable’ on them but only to the extent that this exceeds their personal allowances.
The scheme provider may, by default, deduct basic rate tax, but if the children have their own tax codes, then it may be possible for the scheme to deduct the correct amount, if indeed there is any tax due i.e., on amounts above their personal allowance(s).
Furthermore…
Children are treated as taxpayers from birth.
Of course, most minor children do not have any material income in their own names, but if they do, they would also have their own personal allowance (currently £12,570 pa).
I’m guessing that if they are going to be receiving a share of their late mother’s DB pension income, it will be ‘taxable’ on them but only to the extent that this exceeds their personal allowances.
The scheme provider may, by default, deduct basic rate tax, but if the children have their own tax codes, then it may be possible for the scheme to deduct the correct amount, if indeed there is any tax due i.e., on amounts above their personal allowance(s).
Edited by Mogul on Saturday 7th January 16:06
Thank you very much for the comments and I’ve reposted in the other area.
My children get an income on their stocks and shares accounts in the form of dividends from some FTSE shares but it’s not enough to trigger an tax. They have a cash CTF and a SIPP pension too but that won’t impact any tax
It looks like the payment has gone to a BR tax code. I’ll see if the other thread offers any other suggestions. Personally I think it’s an emergency tax code and a mistake. They don’t earn from a salary and this is their only income (other than dividends) and will not break the tax free allowance.
I’ve arrange for it to be paid directly to their Lloyd bank accounts for now and who knows they may even get a tax refund !
My children get an income on their stocks and shares accounts in the form of dividends from some FTSE shares but it’s not enough to trigger an tax. They have a cash CTF and a SIPP pension too but that won’t impact any tax
It looks like the payment has gone to a BR tax code. I’ll see if the other thread offers any other suggestions. Personally I think it’s an emergency tax code and a mistake. They don’t earn from a salary and this is their only income (other than dividends) and will not break the tax free allowance.
I’ve arrange for it to be paid directly to their Lloyd bank accounts for now and who knows they may even get a tax refund !
Edited by oldaudi on Saturday 7th January 18:54
If you speak to the Scheme Administrators they may be able to change the tax code on their payroll system.
if that doesnt work you may need to do a self assessment return to reclaim the overpaid tax. However once they have been set up on HMRC's system you should be able to go into their personal tax account and allocate their PA to the pensions.
I hope that makes sense.
if that doesnt work you may need to do a self assessment return to reclaim the overpaid tax. However once they have been set up on HMRC's system you should be able to go into their personal tax account and allocate their PA to the pensions.
I hope that makes sense.
I'd speak to HMRC to get the correct tax codes operated against the pension income - 0300 200 3300 ideally before 9am. If they adjust the codes for the current year it should refund all the tax paid for this tax year.
For the previous tax year, 2021/22, you will most likely have to complete R40 Claim for Repayment forms, You should ask about this when you speak to the Revenue.
For the previous tax year, 2021/22, you will most likely have to complete R40 Claim for Repayment forms, You should ask about this when you speak to the Revenue.
Edited by Snailpace on Saturday 7th January 21:03
Gassing Station | Finance | Top of Page | What's New | My Stuff