Tax help and advice please.....

vwman_3

I'm looking for a little or perhaps not so little advice.
I retired from work in 2002 on ill-health grounds, when I left work I had a pension which was made up of an ordinary pension, plus an ill-health element.

The ordinary pension is taxable, but the ill-health element is non-taxable, now because of the ill-health element part of the pension, the rules state that I have to claim Incapacity Benefit which I have done.

So the position is as follows.

£1300 per month taxable (Ordinary Pension)
£450 per month NON-taxable (Ill-Health Pension)
£305 Incapacity payment per month paid direct to bank account

Because I get Incapacity Benefit the Inland Revenue deduct the Incapacity Benefit from my personal allowance every year leaving me with £1700 odd of NON-taxable pension then everything else is taxed, in the event of me loosing the Incapacity Benefit then I would be paid the full ill-health pension without it being taxed, but as stated because of the pension rules I HAVE to claim the benefit.

My tax code for the year is 140L so I take it that everything over £1440 is taxed.

I have queeried this with the Revenue and they say that it's correct, but call me stupid but I think that I seem to be paying a hell of a lot of tax.

Anyone who could let me know what they think/advice I would be very grateful

Chrismaths

Incapacity benefit is taxable, so as an administrative tool, HMRC have changed your tax code. If your ill health benefits are not taxable, then you will receive this gross, so you will be paying no tax on it, your taxable income is incapacity + pension = 1605 per month = £19,260 per year. So you should pay tax on it (this year) of £2872, or £240 per month.

The only way to get round it is to vote for someone who will lower taxes

vwman_3

Chrismaths wrote:

Incapacity benefit is taxable, so as an administrative tool, HMRC have changed your tax code. If your ill health benefits are not taxable, then you will receive this gross, so you will be paying no tax on it, your taxable income is incapacity + pension = 1605 per month = £19,260 per year. So you should pay tax on it (this year) of £2872, or £240 per month.

The only way to get round it is to vote for someone who will lower taxes

Thanks very much, you're a star.

jbmagpie

Could I ask VWMAN a question. As his position has struck a chord with my situation. Was the ill-health part of his pension in the form of extra years bought? If it was not so, will he lose that part at some time in the future eg at 60.

vwman_3

jbmagpie wrote:

Could I ask VWMAN a question. As his position has struck a chord with my situation. Was the ill-health part of his pension in the form of extra years bought? If it was not so, will he lose that part at some time in the future eg at 60.

Sent you a PM