Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • mandiskem
    • By mandiskem 15th Jul 17, 3:55 PM
    • 108Posts
    • 39Thanks
    mandiskem
    pension tax
    • #1
    • 15th Jul 17, 3:55 PM
    pension tax 15th Jul 17 at 3:55 PM
    my partner of 19 years paid into a works pension for 2 years bk in 1997 and left in 99 hes 59 now he hasnt worked since 2011 due to having strokes copd diabetes and short term memory loss he wont have a tax code so his letter from the pension company has said the tax will be taken from br code my question is if he hasnt been working how can they take tax off him
Page 1
    • colsten
    • By colsten 15th Jul 17, 4:06 PM
    • 8,590 Posts
    • 7,217 Thanks
    colsten
    • #2
    • 15th Jul 17, 4:06 PM
    • #2
    • 15th Jul 17, 4:06 PM
    If his total income, from pensions and anything else, will be higher than his personal allowance, he will have to pay income tax.

    Tax at the appropriate rate is automatically withheld by pension providers. If he should not pay tax, he can do one of two things, or both:
    1. get a tax code and make sure his pension provider has got that code
    2. call the HMRC at the end of the tax year to get any overpaid tax returned
    • teddysmum
    • By teddysmum 15th Jul 17, 5:06 PM
    • 7,871 Posts
    • 4,693 Thanks
    teddysmum
    • #3
    • 15th Jul 17, 5:06 PM
    • #3
    • 15th Jul 17, 5:06 PM
    my partner of 19 years paid into a works pension for 2 years bk in 1997 and left in 99 hes 59 now he hasnt worked since 2011 due to having strokes copd diabetes and short term memory loss he wont have a tax code so his letter from the pension company has said the tax will be taken from br code my question is if he hasnt been working how can they take tax off him
    Originally posted by mandiskem


    We are only just over 3 months into the tax year, so have 9 months to go, in which he will have the pension income.


    The emergency code is the full allowance so he won't lose out unless he has some reason to have deductions (eg uniform allowance, money owed from previous year).


    They will have looked at his expected income for the 2017-18 tax year and deduct so that the required amount is paid by the end of the year. There maybe some tax free months or no tax at all, depending on the actual income.
    • bigadaj
    • By bigadaj 15th Jul 17, 6:18 PM
    • 9,340 Posts
    • 5,971 Thanks
    bigadaj
    • #4
    • 15th Jul 17, 6:18 PM
    • #4
    • 15th Jul 17, 6:18 PM
    I'd its only 2 years of pension how much money is it?

    If he has health problems then an enhanced annuity may be possible, you don't normally have to take what your provider immediately offers and there may be better opportunities he can transfer to, depending on whether this is a final salary or defined contribution pension.
    • mandiskem
    • By mandiskem 15th Jul 17, 7:05 PM
    • 108 Posts
    • 39 Thanks
    mandiskem
    • #5
    • 15th Jul 17, 7:05 PM
    • #5
    • 15th Jul 17, 7:05 PM
    I'd its only 2 years of pension how much money is it?

    If he has health problems then an enhanced annuity may be possible, you don't normally have to take what your provider immediately offers and there may be better opportunities he can transfer to, depending on whether this is a final salary or defined contribution pension.
    Originally posted by bigadaj
    it turns out to be £21,016
    • mandiskem
    • By mandiskem 15th Jul 17, 7:06 PM
    • 108 Posts
    • 39 Thanks
    mandiskem
    • #6
    • 15th Jul 17, 7:06 PM
    • #6
    • 15th Jul 17, 7:06 PM
    We are only just over 3 months into the tax year, so have 9 months to go, in which he will have the pension income.


    The emergency code is the full allowance so he won't lose out unless he has some reason to have deductions (eg uniform allowance, money owed from previous year).


    They will have looked at his expected income for the 2017-18 tax year and deduct so that the required amount is paid by the end of the year. There maybe some tax free months or no tax at all, depending on the actual income.
    Originally posted by teddysmum
    he dont get any income apart from pip disability benefit which isnt taxed on
    • bigadaj
    • By bigadaj 15th Jul 17, 10:34 PM
    • 9,340 Posts
    • 5,971 Thanks
    bigadaj
    • #7
    • 15th Jul 17, 10:34 PM
    • #7
    • 15th Jul 17, 10:34 PM
    it turns out to be £21,016
    Originally posted by mandiskem
    Ok, I've replied to your pm, but post back with any queries.
    • Dazed and confused
    • By Dazed and confused 15th Jul 17, 10:55 PM
    • 1,466 Posts
    • 610 Thanks
    Dazed and confused
    • #8
    • 15th Jul 17, 10:55 PM
    • #8
    • 15th Jul 17, 10:55 PM
    my partner of 19 years paid into a works pension for 2 years bk in 1997 and left in 99 hes 59 now he hasnt worked since 2011 due to having strokes copd diabetes and short term memory loss he wont have a tax code so his letter from the pension company has said the tax will be taken from br code my question is if he hasnt been working how can they take tax off him


    Even if what the pension company is doing is correct, which is debatable, any tax overpaid can always be claimed back.
    • Linton
    • By Linton 16th Jul 17, 7:38 AM
    • 7,952 Posts
    • 7,754 Thanks
    Linton
    • #9
    • 16th Jul 17, 7:38 AM
    • #9
    • 16th Jul 17, 7:38 AM
    Pensions are taxed under PAYE just like wages. The way this works is that once HMRC are notified that someone has been paid some "wages" they will issue a tax code to the "employer". So for the first ever payment the pension company has no tax code and must use BR on a month 1 basis which will normally lead to an overpayment of tax. Once the correct tax code has been received any excess tax paid will be automatically refunded in the next payment.

    This works fine unless there is only ever one payment in the tax year ,e.g if you take the whole of your pension as a lump sum or if your first ever payment is in March. The over payment will be resolved by the tax year end calculations or you can inform HMRC by use of an appropriate form.
    Last edited by Linton; 16-07-2017 at 7:42 AM.
    • Dazed and confused
    • By Dazed and confused 16th Jul 17, 8:06 AM
    • 1,466 Posts
    • 610 Thanks
    Dazed and confused
    That is wrong. There is no need whatsoever for BR code to be used, it should be the emergency code on a week1/month1 basis if the guidance on gov.uk is followed (booklet CWG2).

    For smaller amounts, like op's partner is likely to get, this will mean no tax is deducted.

    2.2.4 Procedures for other pension and annuity payers
    All pensions and annuities from, or in respect of, a registered pension scheme are PAYE pension income.

    Pension recipient doesn’t give you form P45
    set up a new payroll record for them
    include the date the pension started with the first pension payment
    indicate ‘Yes’ in the occupational pension indicator field on the first and every payment of pension
    include the annual amount of the occupational pension with the first pension payment, don’t pro rata it from the start date
    include the tax code - unless you’re told to use a new tax code by HMRC, use the emergency tax code on a week 1/month 1 basis
    include the Payroll ID, if you want to use one
    • xylophone
    • By xylophone 16th Jul 17, 9:51 AM
    • 21,961 Posts
    • 12,660 Thanks
    xylophone
    How is this pension being taken? PCLS and monthly income?

    Trivial commutation?
    • mandiskem
    • By mandiskem 16th Jul 17, 11:02 AM
    • 108 Posts
    • 39 Thanks
    mandiskem
    How is this pension being taken? PCLS and monthly income?

    Trivial commutation?
    Originally posted by xylophone
    hes took a trivial lump sum the lot he has taken
    • xylophone
    • By xylophone 16th Jul 17, 12:06 PM
    • 21,961 Posts
    • 12,660 Thanks
    xylophone
    See http://www.litrg.org.uk/tax-guides/pensioners-and-tax/how-do-i-cash-my-small-pension-trivial-commutation

    under

    Do I have to pay tax on trivial commutation lump sum payments?
    • Linton
    • By Linton 16th Jul 17, 12:32 PM
    • 7,952 Posts
    • 7,754 Thanks
    Linton
    That is wrong. There is no need whatsoever for BR code to be used, it should be the emergency code on a week1/month1 basis if the guidance on gov.uk is followed (booklet CWG2).

    For smaller amounts, like op's partner is likely to get, this will mean no tax is deducted.

    ......
    Originally posted by Dazed and confused
    Correct. My use of BR was wrong.

    However the OP has now said its a one-off trivial commutation payment, it seems of £21016. The use of M1 means that the tax will be based on an assumption of this being paid every month for a year. and so will be taxed at the Extra rates. The OP should read:

    https://www.gov.uk/claim-tax-refund/you-get-a-pension

    and send in the appropriate form to get the excess tax refunded.
    • Linton
    • By Linton 16th Jul 17, 12:54 PM
    • 7,952 Posts
    • 7,754 Thanks
    Linton
    Further...

    The Which website states that in the absence of a taxcode a BR code could be used. This would mean that the pension company is actually correct as in the OPs circumstances the use of a BR code would be much more sensible and would give a tax take closer to the correct value than the HMRC emergency code.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

398Posts Today

4,576Users online

Martin's Twitter
  • Byebye! I'm about to stop work & twitter, to instead spend glorious time with Mrs & mini MSE. Wishing u a lovely summer. See u in 10 days.

  • WARNING Did you start Uni in or after 2012? The interest's rising to 6.1%; yet it doesnt work like you think. See https://t.co/IQ8f0Vyetu RT

  • RT @JanaBeee: @MartinSLewis Boris is the anomaly (coffee), the others are versions of normal (beer). Lots of same candidates = vote share d?

  • Follow Martin