2 pensions -How is the tax handled?

D1zzy

Am not currently working so don't have a tax code and will shortly be in receipt of the state pension and also a small company pension. My state pension will be just a few pounds under the personal allowance, so in theory will be tax free. All bar a few £ of the company pension will be therefore be subject to 20% tax. Does this get sorted automatically or do I need to initiate something and is that the way it works ie the whole personal allowance being set against the state pension; company pension being fully taxed and any discrepancies sorted out at the year end?

jem16

Your company pension will be given your tax code.

HMRC should send you out a form to fill in which asks for details of all income whether from pensions, jobs or savings. You will then be given a tax code which will take all of this into account and should ensure that you pay the correct tax - however it may take a while for this to get sorted.

So basically if you are entitled to a personal allowance of £6475 ( I don't know your age so have gone with the under 65) and a state pension of £6000pa your allowance would be £475 giving you at tax code of 47L as opposed to 647L.

D1zzy

Thanks jem
Assuming the wheels grind slowly - lets say no tax code issued for month 1 - what's the default scenario?
Full allowance/ No allowance applied to the company pension & state pension not taxed ?

jem16

State pension is always paid gross.

Your company pension would probably use the BR code in the absence of any P45. However I don't know for sure.

Your best bet would be to phone both HMRC and whoever deals with the company pension so you can get everything sorted out asap.

D1zzy

jem16 wrote: »

State pension is always paid gross.

Your company pension would probably use the BR code in the absence of any P45. However I don't know for sure.

Your best bet would be to phone both HMRC and whoever deals with the company pension so you can get everything sorted out asap.

Thanks again - all gets a bit complicated 'cos the company pension is from a company I left in 1979 - so no direct contacts there, (though I can email their help desk and start the endless chain of letters, since no one will speak directly) and my latest P45 (if I can find it :rolleyes:) from a company I left 18 months ago.

jem16

Presumably if they are going to pay you a pension they will have to contact you at some point anyway?

zygurat789

The company you worked for may not pay your pension. It will probably be the pension fund who are a separate entity to the company and could quite possibly be an insurance company. However, your previous employers will be able to put you in touch with them

Mikeyorks

DWP advise HMRC as soon as they start to pay a State Pension. Which should be the trigger for HMRC to issue you with the pension enquiry form P161 :-

http://www.hmrc.gov.uk/pensioners/approaching-why.htm

........ but no harm in contacting HMRC and short circuiting the system - provided you have fairly accurate figures for the amount of State Pension you expect to receive.

Niggles

As Mikeyorks says you should get form P161 from HMRC which is used to prepare your correct tax code. However this does not always happen so worth chasing HMRC.
As also said above your pension provider should use code BR (emergency all taxed at 20%) until HMRC issue a correct code. However it is not unknown for a pension provider to incorrectly use the single persons allowance and not BR. If this happens you can get into tax arrears so again do carefully check the code used by your pension provider.