Code D0 and 647L confusion??

R0bert_Sterling

Hi

I am fully employed, Salary £32,500
Pension Income, £10,000

I have a 647L Tax Code for my employment (okay, agree with that)

D0 Tax Code for my Pension (confused by this).


As I understand, 40% tax is due on an income in excess of £37,401

How is it I am paying 40% on my entire Pension??

Shouldn't I only be paying 40% on my income OVER £37,401 ??

That is, shouldn't I be paying 40% on £5099 and not the entire £10,000 pension?

It seems to be a blanket statement that D0 is applied to pension income as a whole if you have regular paid employment.

Thanks for any replies.

fengirl_2

Yes, you are right, you only need pay 40% tax on part of your pension. Ring your tax office and point this out so they can adjust your code number at your main job to take account of this.

jem16

R0bert_Sterling wrote: »

As I understand, 40% tax is due on an income in excess of £37,401

Correct. However that £37,401 is taxable income after taking account of your personal allowance of £6475 so you actually need to have an income of £43,875 to be paying 40% tax which at £42,000 you are not.

Do you have savings income which will take you over this amount? Remember also that any pension payments will reduce your taxable income - do you currently pay INTO a pension?

It seems to be a blanket statement that D0 is applied to pension income as a whole if you have regular paid employment.

It isn't a blanket statement. I have a full time job and a pension - my pension is on a BR code which is correct for my income.

I would phone up HMRC and see why a DO code is being used as your total income points to a BR code being better. However to advise better we would need to know exact income from employment, pension, savings interest and any investment dividends. Then take off any pension contributions that you make.

Tarasam

There are lots of instances at the mo with codes for the coming tax year due to the new computer system that was installed in the summer, please call HMRC and get us to sort it out for you, it will be corrected instantly.
If your code notice is for 10/11 tax year and you are able to wait to contact unitl mid Feb I would suggest you wait as HMRC have at least 250 calls in the queue at any one time due to the nearing self assessment deadline. These codes have NOT YET gone to employers / pension providers.

R0bert_Sterling

Thanks guys.

I have savings of about £50K spread over a few instant access savings accounts/ISA's etc. paying infinitesimally small amounts of interest, I don't think there is enough income from the savings to make too much difference (I'm not sure how they would know my income from savings anyway).

It would seem there is an error which I will need to resolve.

I will give them a ring but am happy to wait for the dust to settle rather than sit on hold for an age. I would rather pay too much, and be given a rebate, than pay to little and face a demand.

jem16

R0bert_Sterling wrote: »

I have savings of about £50K spread over a few instant access savings accounts/ISA's etc. paying infinitesimally small amounts of interest, I don't think there is enough income from the savings to make too much difference

£50k could be enough to take you into higher rate tax but that depends on how much is in non-ISA accounts and at what interest rate. You should really know how much gross interest from taxable accounts you are making as you may need to declare it if it is enough to take you into HRT.

(I'm not sure how they would know my income from savings anyway).

The banks do send the data to HMRC although may not exactly be in "real time".

Goldenyears

Two months after she retired in June 2009 my wife had the D0 shock horror letter from HMRC "we are going to tax all your (occupational) pension at 40%". I am pleased to say that in one phone call to HMRC her tax code was fixed and they accepted that her employment income had ceased.

R0bert_Sterling

Thanks guys, I will be giving them a call.

Makes you wonder how many people are going to end up with incorrect codes this year!!