Pension tax in year of retirement

jem16

Domain.Rider wrote: »

Now I'm really confused... the higher tax band threshold is £34,700, and my total income will be over that in this tax year, so why no higher rate liability?

You seem to have double posted - read Post 20 where I have answered your question.

Not entirely sure why the main pension is taxed at 20% and the secondary at 40%, either. If it all counts as taxable income, why are they taxed differently?

A secondary income ( as in the links I posted ) has to have all its income taxed at either 20% (BR code) or 40% (D0 code) as your tax-free allowances are set against your first income.
Your main income will have the tax code applied and give you some tax-free, some taxed at 20% and if necessary some taxed at 40% or higher.

Domain.Rider

jem16 wrote: »

You also have to add the personal allowance of £6475 to that making £43,875 before you pay higher rate tax.

You seem to be well below that. Are the figures by zygurat correct?

Ah, of course, the personal allowance...

zygurat's figures look near as dammit. The only extra I can think of was some cash from an SAYE share option scheme that I was told wasn't taxable. Maybe it was after all.

Domain.Rider

jem16 wrote: »

You seem to have double posted - read Post 20 where I have answered your question.

Yup, sorry 'bout that

A secondary income ( as in the links I posted ) has to have all its income taxed at either 20% (BR code) or 40% (D0 code) as your allowances are set against your first income.

OK, thanks for taking the time to explain

I'm reading those links, but it's not always easy to see which parts apply to my particular circumstance.

jem16

Domain.Rider wrote: »

Ah, of course, the personal allowance...

zygurat's figures look near as dammit. The only extra I can think of was some cash from an SAYE share option scheme that I was told wasn't taxable. Maybe it was after all.

I believe they are non-taxable.

http://www.lewissilkin.com/our_knowledge/knowledge_articles/Pages/SAYEshareoptionplans.aspx

If I was you I would be getting onto HMRC and going over your figures and ask why you have a D0 code as opposed to a BR code for your 2nd income.

Can you clarify what tax code is applied to your main pension please?

feesarefare

However sometimes you'll have to use a special method of working out their tax deductions - called a 'Week 1' or 'Month 1' basis depending on how often you pay them. With this method, you ignore all previous pay and tax in the year. HMRC will sort out the final position with your employee at the end of the tax year.
You must use the Week 1 or Month 1 basis if:

• HMRC tells you to

Jem you are absolutely sure this isnt the case here.

AVC/pension provider is ignoring all previous pay and tax in the year and taxing accordingly because the HRMC tells them to?

Domain.Rider

jem16 wrote: »

Can you clarify what tax code is applied to your main pension please?

Yes, I don't have a coding notice for it, but the payment record slips say 647L -1.

Domain.Rider

jem16 wrote: »

If I was you I would be getting onto HMRC and going over your figures and ask why you have a D0 code as opposed to a BR code for your 2nd income.

When I got the revised D0 coding for the 2nd pension, I did ring them and ask. The tax guy just said it was because my income would exceed the higher rate threshold for the tax year. When I asked if they could give me the figures they used to work it out, he said it would be what was on the Pension Coding Form (P161), which I had completed. He couldn't or wouldn't confirm the actual figures they had used.

jem16

feesarefare wrote: »

Jem you are absolutely sure this isnt the case here.

Was that a question?

No I can't be absolutely sure what HMRC is up to but I don't think it is. The OP says that HMRC has given a D0 code to his secondary income ( the AVC provider) with no mention of a Wk1/Mth1 suffix.

However what they have done as the OP has just clarified is to give a Wk1/Mth1 suffix to the main pension.

AVC/pension provider is ignoring all previous pay and tax in the year and taxing accordingly because the HRMC tells them to?

Except in this case it seems to be the main pension provider that's using the emergency tax code.

jem16

Domain.Rider wrote: »

Yes, I don't have a coding notice for it, but the payment record slips say 647L -1.

That's the emergency code. The -1 suffix shows that it is being used on a non-cumulative basis and ignoring what has happened the rest of the tax year. What did you do with your P45 from work?

I'd be asking HMRC when they are going to issue 2 proper tax codes.

Domain.Rider wrote: »

When I got the revised D0 coding for the 2nd pension, I did ring them and ask. The tax guy just said it was because my income would exceed the higher rate threshold for the tax year. When I asked if they could give me the figures they used to work it out, he said it would be what was on the Pension Coding Form (P161), which I had completed. He couldn't or wouldn't confirm the actual figures they had used.

What did the P2 coding notice say about the D0 code - anyhting useful?

Is there any state pension involved?

Domain.Rider

OK, I'm going to dig out all the paperwork and double-check my income figures - I may have missed something, what with holiday pay-in-lieu, share options, uncle Tom Cobley and all...

So (I think) I'm reasonably clear that, if my total income for the year, before tax and after the personal allowance, is over the higher rate threshold, then the D0 coding on the 2nd pension is correct, and I won't be due any rebate, all other things being equal. If it's not over the threshold, I'll query HMRC again.

But come April 2011, the D0 coding on the 2nd pension should revert to BR, because income for next tax year will be well below the higher threshold <phew!>