Confusion with Tax codes

jem16

ka7e wrote: »

My mother (77) is in receipt of the State pension. My father died in Feb and she is now paid a portion of his work pension from the Teacher's Pensions. These are her only 2 sources of income. Teacher's Pension originally put her on tax code 647L, but has recently changed it to K52.

Neither of us can understand the official explanation of her new tax code!

Can anyone help decipher this, please

At age 77 your mother is entitled to a tax-free personal allowance of £9640 provided her total taxable income is not over £22,900. If it is over £22,900 she loses some of her personal allowance by £1 for every £2 she is over the limit.

Now if she is still under the £22,900 her allowance has changed from £9640 to a negative allowance of £520. If her state pension works out at £10,160 this would give a tax code of K52.

However the K52 code could also include a portion of tax that she owed from last year.

Basically what happens is the state pension is taxable but is paid gross. So if your mum is a taxpayer (which sounds likely) then the amount of her state pension is deducted from her allowances resulting in a lower tax code than normal so that any tax owed can be collected via PAYE from the teacher's pension she now receives.

With further information on what she receives from the teacher's pension and her state pension we could show you a worked example.

Did she receive a coding notice from HMRC? This will also show how it is worked out.

ka7e

Jem16 - thanks, your explanation I understand!

I think Mum's pension works out at about £770 per month, the teacher's pension seemed to be £700 but the new tax code makes it only £540 per month.

jem16

ka7e wrote: »

Jem16 - thanks, your explanation I understand!

I think Mum's pension works out at about £770 per month, the teacher's pension seemed to be £700 but the new tax code makes it only £540 per month.

OK if state pension is £770pm then that's £9240pa. Her two incomes come to £17,640 so she's below the age related allowance amount so should get the full personal allowance of £9640.

Her coding would be worked out this way - £9640 (personal allowance) - £9240 (state pension) = £400. This would normally give her a tax code of 40Y. With her code being 52K there is another deduction amounting to around £900. This could be unpaid tax from 09/10 tax year as she would have paid too little tax through being on the 647L tax code as this didn't take account of her state pension.

Newly_retired

I have had a notice of coding today - K13 - which states that I only get £6475 Personal Allowance - for people between 65 and 74 at 5 April 2011 with total income of over £28930 - That's not me! So I rang and eventually got through - it seems they still think I have some income from my former employer. Anyway I had all the details of my pension income to hand for the guy to be able to complete form P161 over the phone till we got to Savings. Being a good MSE -er I have moved my savings around a lot + got FSCS compensation from the Icesave debacle - so it is going to take me ages to check I have got all my Tax certificates on my many accounts and do the sums, so he is going to send me a form in the post after all. Since all my savings except ISAs have had tax deducted it is a bit of a nuisance to say the least - and as there's no danger I will be in a Higher rate tax bracket I find it a huge waste of time
.Expensive phone call but I hope to end up paying less tax in the end.

lilac_lady

I've been trying to get through to my tax office all week as I've been put on BR (basic rate 20%) tax for all my income - no allowances. The 0845 number lets you press a lot of selection then cuts you off because they're too busy. Argh!

jem16

lilac_lady wrote: »

I've been trying to get through to my tax office all week as I've been put on BR (basic rate 20%) tax for all my income - no allowances. The 0845 number lets you press a lot of selection then cuts you off because they're too busy. Argh!

Try early on a Saturday morning - seems to be more successful.

Newly_retired

I have spent too many hours this weekend sorting out my numerous savings accounts, including FSCS compensation from the Icesave debacle. As those were the days of hefty 6-7% interest coming in from bonds of various lengths, it comes to a surprising amount, far far moe than I am getting in this tax year. I hope this doesn't push me over a threshold so that I end up losing some of my higher personal allowance.
I had a bit of trouble with some accounts that are closed now eg Halifax regular saver at 12% which rolled over into a new one at 5%. I may have to contact Halifax direct for this one. Also current accounts- they don't normally issue tax certificates either, not that there was a great amount, but I need to get this right, not have HMRC making further trouble for me.
So be warned, when you are coming up to 65, all this has to be sorted.

margaretclare

dzug1 wrote: »

I think you would be wrong in assuming they know your age - or know it in a way they can make use of it. (The new computers, when they finally work in the way intended, may fix this). At present it's a bit hit and miss.

So tell them anyway.

Ah, the new computers. They have recently been blamed for a mystifying occurrence - HMRC appeared to have 'forgotten' that I've been married for 8 years and suddenly started writing to me in my original name!!

It took a couple of phone calls to sort this out. Apparently the new computers had failed to recognise that I'd notified marriage and change of name back in 2002, even though the old computers had happily dealt with this. We even have married tax allowance which was split between us.

However, the computers are not human beings and can't be blamed. 'Garbage in, garbage out'.

zygurat789

Let us not forget that the government is short of money. All these computer "errors" seem to have been in the governments favour and, if you read these boards, you will be aware that a lot of people do not understand tax and are overpaying, will continue to overpay and will never realise it.
Conspiracy?

lilac_lady

jem16 wrote: »

Try early on a Saturday morning - seems to be more successful.

Thanks, but I've tried then and every other time that I can. I've resorted to writing to them by post as I can't find an email address for queries.