Dads Tax Code Now Mum Has Gone

bj-sailaway

My mum died in February, one of the consequences of this is that my dad loses his married mans allowance. But his tax code has dropped to 100 (or thereabouts).

Can it really be right that he can only have just over £1000 income tax free? I thought everyone was entitled to at least £4000.

He only has an income of about £8000 per annum, so he doesn't qualify for any benefits or relief on council tax, apart from single persons discount. This extra tax to pay has hit him hard.

Any advice would be greatfully received.

jem16

The married couples' allowance is still available for anyone born before April 1935 so if your Dad is old enough he would be getting this.

Again, dependant on age his tax free allowance will be either £7280(65-74) or £7420(75+). The reason that he has a code of around 100 is probably because of the state pension. This is paid gross and then clawed back through his tax code. However at £7280 minus £4381(pension) I would have though the code would be more around 300.

Either check his tax code notice or phone the tax office and I'm sure they will go through it.

margaretclare

jem16 wrote:

The married couples' allowance is still available for anyone born before April 1935 so if your Dad is old enough he would be getting this.

Again, dependant on age his tax free allowance will be either £7280(65-74) or £7420(75+).

Assuming he has no other income e.g. private pensions, and depending on his age, he'll have a basic personal allowance of either £7280 or £7420.

The reason that he has a code of around 100 is probably because of the state pension. This is paid gross and then clawed back through his tax code. However at £7280 minus £4381(pension) I would have though the code would be more around 300.

No, that's not how it works. On one side of the Notice of Coding you have Personal Allowances according to age. On the other side you have income. If Dad has ONLY the state pension, no SERPS, no work pension, then on the left-hand side there'll be £7280 and on the right there'll be the state pension for the year. Take the right-hand column from the left and that leaves the tax-free sum for the year. If he has no other income I would imagine there'll be NO tax to pay at all.

Even with SERPS and annuities as well as state pension, my DH and I have very little tax to pay (I paid £6 last year!) Oh, and we split the married person's tax allowance between us, which did confuse our respective Tax Offices for a while.

The reason the code is set at 100 is probably that the Tax Office haven't got their act together yet. It does take them a little time to get all these changes put through the system, and they need all the relevant documents - your Mum's death certificate, for example.

Either check his tax code notice or phone the tax office and I'm sure they will go through it.

Yes, Dad should do that.

Margaret Clare

jem16

margaretclare wrote:

Assuming he has no other income e.g. private pensions, and depending on his age, he'll have a basic personal allowance of either £7280 or £7420.

I thought that was what I said? The OP said that his dad had a total income of about £8000 which is below the limit for age related allownaces.

No, that's not how it works. On one side of the Notice of Coding you have Personal Allowances according to age. On the other side you have income. If Dad has ONLY the state pension, no SERPS, no work pension, then on the left-hand side there'll be £7280 and on the right there'll be the state pension for the year. Take the right-hand column from the left and that leaves the tax-free sum for the year. If he has no other income I would imagine there'll be NO tax to pay at all.

Again that's what I said. £7280 on the left(allowances) minus the state pension of £4381(this might not be correct as I'm going with the website stating £84.25 per week - but his state pension may be higher than this) on the right(deductions) This would leave £2899 as a tax free allowance, so a code of 289 approx ( hence why I said around 300)

The OP says that his dad's income is around £8000 per annum but without knowing how this figure is made up it's difficult to work out. What is the extra - Second state pension or private pension?

The reason the code is set at 100 is probably that the Tax Office haven't got their act together yet. It does take them a little time to get all these changes put through the system, and they need all the relevant documents - your Mum's death certificate, for example.

This may be the case. However it may be correct. If the whole of his income is state pension plus state second pension( I have no idea if this is possible - only guessing) the code may even be 100K - K being a negative allowance.

sarahlouise210

If the OP only had a state pension then he would not need a tax code at all!! He must either have an occupational pension or employment.hence where the £8000 total income comes from. My guess is that the tax office have had all the necessary information on his wife passing away and have changed his tax code from April to remove the Married Allowance available due to his age. As has already been explained very well..His tax code will have his personal allowance..less his state pension(which may have increased since his wife died) and possibly a deduction for a small untaxed occupational pension as well. Based on the basic info supplied I would say the tax code is probably right.

margaretclare

jem16 wrote:

I thought that was what I said? The OP said that his dad had a total income of about £8000 which is below the limit for age related allownaces.

Again that's what I said. £7280 on the left(allowances) minus the state pension of £4381(this might not be correct as I'm going with the website stating £84.25 per week - but his state pension may be higher than this) on the right(deductions) This would leave £2899 as a tax free allowance, so a code of 289 approx ( hence why I said around 300)

Yes, but you talked about (Dad's pension) being 'clawed back' - that's why I said 'that isn't how it works'.

Everyone has income which is taxable, even a pensioner! Everyone also has personal allowances, and if income is below personal allowance level then there's no income on which tax can be charged.

This may be the case. However it may be correct. If the whole of his income is state pension plus state second pension( I have no idea if this is possible - only guessing) the code may even be 100K - K being a negative allowance.

Yes, I failed to notice this. Every tax code has a number and a letter, and it can be the letter which is the most important. Dad will have been sent a little leaflet from the Tax Office explaining the codes, what they all mean etc. They are really doing their best to explain it all in language a 5-year old could understand, so is there some reason why Dad isn't on to all this himself???

Margaret Clare

jem16

margaretclare wrote:

Yes, but you talked about (Dad's pension) being 'clawed back' - that's why I said 'that isn't how it works'.

Perhaps "clawed back" wasn't the best turn of phrase

However I was trying to explain to the OP why Dad would only appear to have a tax free allowance of £1000. Most people have been used to the PAYE system where everything was taxed before you got it. It then gets more complicated when you have income(above your personal allowances) from different sources, some of it already taxed, some of it untaxed.

Everyone has income which is taxable, even a pensioner! Everyone also has personal allowances, and if income is below personal allowance level then there's no income on which tax can be charged.

This is very true! My 15yr & 18yr old sons had to pay tax when they got a pension from their late father's scheme. We've had frequent visits to HMRC over the last 4 years to sort out their tax affairs which got even more complicated when they both got part-time jobs.

Yes, I failed to notice this. Every tax code has a number and a letter, and it can be the letter which is the most important. Dad will have been sent a little leaflet from the Tax Office explaining the codes, what they all mean etc. They are really doing their best to explain it all in language a 5-year old could understand, so is there some reason why Dad isn't on to all this himself???



Margaret Clare

Perhaps Dad is on to it himself. However as the OP asked for advice, I was assuming that Dad had asked her/him about it. Not everyone is as clued up as you obviously are, no matter their age.

bj-sailaway

Hi there,

Sorry I haven't got back sooner. Yes, my dad has a small pension from his employment as a clerk of works for Surrey County Council, and he's not onto it, as my mum was the financial wizard - she was a real MSEer before this website was a twinkle in Martin's eye!

Sorry if we seem a bit dim on all this, I am used to PAYE, and have very straight forward salary, with no expenses or car allowances - just a basic salary.

Thank you so much for all the postings, but I still can't quite work it out, so I'll get all his papers and be back! I'll also ask if a booklet came with the notification.

He has worked on everything just working itself out and has taken the code on his pension payslip as gospel - probably a mistake.

Thanks again everyone - we'll get on the case. Oh I wish my mum was still here to sort it all out for us!!!

Oh, and dad is 75.

margaretclare

Oh I wish my mum was still here to sort it all out for us!!!

What I wish, what I've realised from seeing this type of scenario crop up repeatedly, is that couples would work as a team with their financial affairs! I've seen it over and over again. Often it's the man who dies, the woman has been given 'housekeeping money' for several decades, suddenly he dies or is otherwise incapacitated and she is left floundering, not knowing about tax, insurance, the mortgage, the normal utilities and anything else.

As your Dad is 75 his tax allowances will be £7420. This is the amount of income he can have per year before he starts paying any tax at all. On his Notice of Coding for 2006/7 this figure is on the left hand side. On the right is his income, and this includes his state pension, SERPS, his work pension, and the total on the right is deducted from the total on the left. This is how the tax code is arrived at.

Mine was quite complicated for some time, I'm 70, but a few years ago I had state pension, SERPS, 3 annuities, and I also had earnings from part-time agency work with Adecco! In 2002 we got married, because DH just falls into the age-group we claimed married people's allowance and we split it between us. So you can see, this must have been quite a headache for all the different tax offices that both of us were involved with. DH has state pension, SERPS and an annuity from Scottish Widows. However, the tax people managed to sort it all out and last year I actually got a repayment from the tax I'd paid on earnings 2 years before.

They're pretty good if you actually talk to them. They prefer to talk to the person though, not a son, daughter or even a spouse! - it's due to confidentiality. So better if Dad talks to them.

Best wishes

Margaret Clare

bj-sailaway

Thank you for your advice.

My mum and dad worked as a fantastic team for 59 years, my dad is quite capable of sorting out financial affairs, it's just that my mum usually did it, they shared everything, nothing was 'his' or 'hers'. It is just that all the administration to do with losing her is so hard when it feels so un-important in relation to the loss.

Anyway, thanks for the advice, I'll look at the 2006/7 advice and he can contact the tax office.

jem16

I know how you feel - I went through the same thing 4 years ago when I lost my husband.

Do you have a local tax office? If so you can both go in and talk things through which can often be better.

If you have any more questions after reading the tax notice, please ask. I'll try to answer them.