Pensions and Paying Tax??

Morxx

At the moment I receive the state pension and pay tax on it via a tax return. Next month I will start receiving a personal pension and received a letter saying it will be taxed with an emergency tax code (until they hear what my tax code is) before paying me.

So does this mean that the private pension will be taxed at source and my state pension will still be paid gross or do they take the state pension into account when they give me a tax code?

EdInvestor

State pensions are always paid gross.When your PP starts to pay out they willl issue a tax code taking into acccount both of them to the PP provider, which willl then tax the PP at source.

Morxx

EdInvestor wrote: »

State pensions are always paid gross.When your PP starts to pay out they willl issue a tax code taking into acccount both of them to the PP provider, which willl then tax the PP at source.

I know I am being thick but when you say they will issue a tax code taking into account both of them, does that mean extra tax is taken off the PP which covers the tax for the state pension?

What I am trying to work out is whether I will still have to pay tax twice a year on my state pension?

Thanks

EdInvestor

Morxx wrote: »

I know I am being thick but when you say they will issue a tax code taking into account both of them, does that mean extra tax is taken off the PP which covers the tax for the state pension?

The tax payable on the state pension is usuallly covered by the personal allowance.If there is additional tax to pay it would be subtracted via the tax coding on the usual PAYE basis.

chesky369

Welcome to the wonderful world of retirement and the tax code!!

In my first year of retirement, I received five separate tax codes on five different occasions. And sometimes, they were for different years.

Had to lie down in a darkened room.....................

dzug1

Morxx wrote: »

I know I am being thick but when you say they will issue a tax code taking into account both of them, does that mean extra tax is taken off the PP which covers the tax for the state pension?

What I am trying to work out is whether I will still have to pay tax twice a year on my state pension?

Thanks

No you won't - with luck things will work out so that at the end of the year you'll have paid the right amount of tax. That's the aim of the system anyway.

If you haven't you'll either get a refund or have the choice of paying the hopefully small amount due or carrying it forward to a future year (via yet another code adjustment...)

Mikeyorks

Morxx wrote: »

I know I am being thick but when you say they will issue a tax code taking into account both of them, does that mean extra tax is taken off the PP which covers the tax for the state pension?

That's exactly the end result. Your Personal Allowance is reduced by the amount of the State Pension (to a negative value if needed) .... so the tax due on the combined pension values is deducted from the private pension.

What I am trying to work out is whether I will still have to pay tax twice a year on my state pension?

Assuming that relates back to where you came in (re Self Assessment) ..... the answer is 'no'. But don't forget you have a transitional period from your last SA Return (08-09 ??) up to where the PAYE takes over. If you've been required to make payments on account (you mention 'twice yearly' so I assume you have) that should broadly resolve the money side of it. You will just need to make a final Return covering Apr 09 to Feb 10. Which you can't normally do until after mid-April 2010.

EdInvestor

chesky369 wrote: »

Welcome to the wonderful world of retirement and the tax code!!

In my first year of retirement, I received five separate tax codes on five different occasions. And sometimes, they were for different years.

Had to lie down in a darkened room.....................

LOL.I had exactly the same experience.:rotfl:

Left and right hand appeared to be about as far away from each other as it was possible to be.

Agapanthus

EdInvestor wrote: »

Left and right hand appeared to be about as far away from each other as it was possible to be.

I think they've just moved further. DH has just received a tax code for his £12k pension at 40% tax. Apart from a few savings (which aren't paying very well at all at the moment) it's his only income. The letter that came with it said that it's one of the first batch of tax codes to be processed by HMRC's new computer system. Aargh! :eek:

We guess that they've looked at his 2007-8 tax return (he's only just submitted the 2008-9 one), which included a large payment of CGT on the sale of a house. I'm just wondering what my tax code will be like when it comes, as I paid the same amount of CGT...

jennifernil

Apparently their shiny new computer is creating chaos!

lolly5648

Oh the joys of paying tax, I have all this to look forward to in March