Tax on Pensions query

HennyPagget

Hello,

My wife and I have both received our tax coding notice for this coming year.

Mine is: 203P and hers is K22.

I've tried looking on the inland revenue website for explanation of my wife's code, but to be honest I am pretty confused by what I have read on there.

We are both aged 65, have simillar local authority pensions and state pensions. Does anyone have an idea as to why we have such different codes, when earnings pre-tax are simillar? I presume that this 'K' code is slightly special - but don't why?

Over the last few years (since retirement) my wife has been paying approx £100/month more tax than me despite her gross pension being £85/month less than mine. We have no other incomes or investments.

Does this sound like the IR have made a boo boo, or are there any other circumstances for this ''K'' Code that we may have overlooked?

Before I get in contact with the IR:

If the IR have made a mistake, how far back can my wife claim refund, or alternatively if they've been too generous with me - how far back can I be held liable for their mistake?

Sorry if this is all a bit confusing, I hope someone can give some advice, as we always were (and still are PAYE) through our old employer - we've perhaps daftly taken it for granted that they would get it right.

Many Thanks,

HennyPagget

o_t_e

Hi HennyPagget,

The K code is often used when the inland revenue want to collect tax due on a state pension but can't collect all of it just by reducing an individuals personal allowance, as they appear to be doing with your code.

For your wife it means she has zero personal allowance and they also want to recoup the tax on £230 through her local authority pension (don't ask how K22 equates to 230 - it just does!)

There are other things that might impact on your wifes situation, if she had savings and was a 40% tax payer fo example - but I can't imagine your two pensions would put either of you into that bracket. Equally K codes can result from underpayments of tax in prior years but the fact that your wife has been consistantly paying more tax on a lower income suggests that is not the case here.

If you've both turned 65 it's worthwhile both of you checking you are getting the correct personal allowance - it can increase at 65 dependent on income.

It would be worthwhile checking to see how much income they belief your wife is receiving - if it's wide of the mark they can correct it for this tax year by taking correct details over the phone but for prior years you would have to write in - if there has been an overpayment of tax you can claim for seven tax years.

The bottom line is if you (actually your wife) rings they will go through the K code and point to the factors that have lead to it - if they're wrong it can be changed.

dunstonh

Also, if your sole incomes (including interest from savings and dividends, not including ISAs or Investment Bonds and a few others), exceeds £20,100 (for 06/07), then there the age allowance you get at age 65 starts to be clawed back. This will usually appear as a negative in the tax code notification.

HennyPagget

dunstonh wrote:

Also, if your sole incomes (including interest from savings and dividends, not including ISAs or Investment Bonds and a few others), exceeds £20,100 (for 06/07), then there the age allowance you get at age 65 starts to be clawed back. This will usually appear as a negative in the tax code notification.

:T Thank you so much.I feel much more confident now to make that phone call knowing that I am probably right about my feeling that my wife is being over taxed!

sarahlouise210

As you say you have similar incomes and are the same age the most likely scenario is that you have been allocated with your age allowances and your wife has not. Your wife may need to complete a form P161 to get the allowances allocated - it asks details of income from all sources.

HennyPagget

Thanks Louise...I wish I could see clearly now the brain has gone