State pension and tax

wenro · 14 December 2017 at 12:15PM

Can someone please explain why when you reach the state pension age in November and receive your pension the tax office use a full years amount against your personal allowance

Icequeen99 · 14 December 2017 at 1:17PM

wenro wrote: »

Can someone please explain why when you reach the state pension age in November and receive your pension the tax office use a full years amount against your personal allowance

have you spoken to them?

IQ

Edited as I misread the original post

sheramber · 14 December 2017 at 2:59PM

When the state pension is added in you pay extra tax . But you only pay 1/12 of the amount each pay day from the code number is increased.

e.g If you receive £600 per month from November to March - 5 months you receive £3000.

if your code is changed to include £3000 you will only pay tax on 1/12 of £3000 each month for November to March., so 5/12 = 5x250= £1250

But you should be paying Tax on £3000 so by including the year's amount ££7200 you pay tax on 5/12 of £7200= £3000

So you pay the correct amount of tax due and do not incur an underpayment at the end of the year.

molerat · 14 December 2017 at 3:15PM

They deduct the full annual amount but change you to a M1 non cumulative code so the correct tax is deducted. If they deducted the actual amount you would end up paying tax in one lump according to how many 1/12ths of the year had already passed then the correct amount going forward.

badmemory · 14 December 2017 at 5:51PM

Have you had a notice of coding to tell you your new tax code? Does it say something really informative (yes I am being sarcastic) like we will deduct tax in a special way? (This is what my letter in the same circumstances said). This is HMRC gobbledegook for - your new tax code is on a month 1, week 1 basis.

State pension and tax

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