Bewildered Tax on 4 pensions

mis_sally

I have already sent off my P161 but as yet not received my tax codes for 2011/2012, I have read on this forum about HMRC sending out the wrong codes and this causes me concern as I have 4 pensions 2 of them miniscule and am bewildered about how they will split my personal allowance and what tax codes to expect. I know I will be due to pay about £90 a year tax and that my personal allowance will be £7475

It will be very much appreciated if some one can help me with this. Here are the details and amounts per year..

State pension £6365.32
Private pension £1341.60
Private pension £222.72
Private pension £ 20.91

ceeforcat

What a nightmare for you! Anyway, I must presume that you are under 65 and not entitled to age allowance. If so, the way this shouuld be done is as follows:

main pension code - 86L. This is calculated - 7475 less state pension 6365 less 222 less 20 equals 868.

Pension 2 - code 22T to cover.

Pension 3 - code 2T to cover.

If these are operated, you will pay the correct tax.

Good luck!

mis_sally

ceeforcat wrote: »

What a nightmare for you! Anyway, I must presume that you are under 65 and not entitled to age allowance. If so, the way this shouuld be done is as follows:

main pension code - 86L. This is calculated - 7475 less state pension 6365 less 222 less 20 equals 868.

Pension 2 - code 22T to cover.

Pension 3 - code 2T to cover.

If these are operated, you will pay the correct tax.

Good luck!

:T

Thanks so much at least now i know what codes i should have and how they are worked out .but why the T instead of L on 2 and 3

ceeforcat

In my view (and I know Mikeyorks thinks differently which is fine) the personal allowance will be increased by 1000 in April. HMRC will ask all employers to increase all 'L' codes by 100 to take account of this. If 'L' was applied to your two smaller pensions you would benefit from this rise three times.

However, in your case, this would be irrelevant as you will not pay tax at those sources in any case.

mis_sally

ceeforcat

I think i,m going to need that luck i got my tax codes this morning and they have allocated 722L to my main pension :mad:

allocated £249 to pension 2 & 3 not sure if that will make much difference to income but i got the 22T & 2T codes..

Maybe i should leave it and get lots of tax free money :rotfl: :rotfl:

Mikeyorks

When does the State Pension start to be paid? As it sounds as though those Codes came from the annual bulk issue of P2s (Feb / Mar) .... and will be revised once the P161 is processed.

ceeforcat

Agree Mike - op is due to pay about £96 per annum on the largest pension and, for each month the code is incorrect, is about £8 underpaid. Impressed that HMRC got those codes correct so quickly.

mis_sally

Mikeyorks wrote: »

When does the State Pension start to be paid? As it sounds as though those Codes came from the annual bulk issue of P2s (Feb / Mar) .... and will be revised once the P161 is processed.

I'm due to get my first state pension payment this week,

Mikeyorks

mis_sally wrote: »

I'm due to get my first state pension payment this week,

As the P161 is normally issued a few weeks in advance .... then I would expect they will correct the coding in respect of the State Pension in the next couple of weeks.

Be prepared - (in particular if you've opted to be paid 4 weekly) that the Coding may reflect a small underpayment for 10-11. As the State Pension is taxable when your entitlement arises - not when it's paid (as you will be more used to under PAYE). So you may well have more entitlement during 10-11 than payment .... and the coding will reflect the former.

It's not so noticeable earlier in the year .... but tends to come to attention if your birthday is mid-March. As you can finish with an underpayment for that closing year - when you haven't actually been paid anything!

mis_sally

Mikeyorks wrote: »

As the P161 is normally issued a few weeks in advance .... then I would expect they will correct the coding in respect of the State Pension in the next couple of weeks.

Be prepared - (in particular if you've opted to be paid 4 weekly) that the Coding may reflect a small underpayment for 10-11. As the State Pension is taxable when your entitlement arises - not when it's paid (as you will be more used to under PAYE). So you may well have more entitlement during 10-11 than payment .... and the coding will reflect the former.

It's not so noticeable earlier in the year .... but tends to come to attention if your birthday is mid-March. As you can finish with an underpayment for that closing year - when you haven't actually been paid anything!

I have been unemployed this last year but got 6 months contribution based JSA earlier in the year then i took the private pensions as from september 2010 so i have not had enough income to pay tax for this year,i hope...Just hoping to get everything in order for the new tax year when i will become a tax payer again,with a small income one cant afford to be overpaying or underpaying on tax.I opted to be payed weekly i prefer the money to be in my bank rather than theirs. I guess i will see what happens in the next couple of weeks Thanks for your help..

Mikeyorks

mis_sally wrote: »

I opted to be payed weekly

In which case you won't notice any underpayment. Only really reveals with the 4 weekly and the 13 weekly (no longer available?) payments.