Taxed pension payments to my non-tax paying sister. What happens now?

Nine_Lives

Basically my dad died end of Sept 2011. We thought it'd only be my mum who gets any money from his pension, but turns out my 20yr old sister gets something as she's in full time education.

She received a letter today telling her exactly what she'll be getting & that it'll be taxed.

My sister gets £30/week payment through college (EMA is it??). She only gets this if she turns up every day, so a potential £1560/yr (minus school holidays i guess).
She has a 'sort of' job, where she works if they need her. The odd day here & there every month or so. It certainly doesn't take her over the taxable limit.

This is the letter she received:


She's never had a full time job - only this job where she turns up if they want her.

How would she go about receiving gross payments?

Mikeyorks

The clue is in the 5th para? Where it says Basic Rate will apply until an appropriate Code is received.

As them if they require a P46 .... as you send off the NINO confirmation.

Nine_Lives

My sister just posted off her NI number after receiving this letter.

I saw the 5th para - but what happens here? Do HMRC get in touch with Capita Hartshead at [some point [- end of tax year?]]? Is it all handled automatically, or does my sister need to do something? If she plays the waiting game, then i imagine that at the end of the tax year, she'll be due a rebate of £xyz (i.e. ALL tax she'd paid on the pension).
But one part of me is niggling away that if you owe the tax office money, they'll be banging on your door in the middle of the night. But if they owe you money, then you wont see them for dust.

Mikeyorks

Capita Hartshead have no real detail of your sister so can't communicate much to HMRC. In which case a P46 needs to be supplied via Capita to solicit a Code number. Once that's provided (likely 747L) then any tax deducted to that point will be refunded via the next Capita payment. Provided that's before 6th April.

If afterwards then tax deducted will need to be reclaimed. So it's easier to qualify the requirement with Capita now.

Nine_Lives

I've just had a bad realisation.

We have standing orders in place (as my sister has a Halifax reward current account) so that £1000 cycles through my account, other family members, and then back to me. This will mean £12,000 cycling through her account each month.

Although it's not from an employer, will this be classified as "income" & put her over the limit?

If so then it might be worth not cycling £1000 for the 2012-13 tax year, as £60 from Halifax vs £xyz from the pension is a no brainer.

However if it's not classified as income, then it's a different picture.

Mikeyorks

It's not classified as income. If that were the case I'd be paying a lot more tax than currently - and so would you, of course? As - presumably - you cycle the £1k through your accounts?

Nine_Lives

Mikeyorks wrote: »

It's not classified as income. If that were the case I'd be paying a lot more tax than currently - and so would you, of course? As - presumably - you cycle the £1k through your accounts?

You have a point!

jem16

K_P83 wrote: »

She has a 'sort of' job, where she works if they need her. The odd day here & there every month or so. It certainly doesn't take her over the taxable limit.

How is she paid for this job? Is she properly on their payroll and has a tax code for this?

For the pension, the pension provider will complete form P46(pen). This should be done automatically ( it was for my sons) but I would ask about it anyway as Mikeyorks suggests.

http://search2.hmrc.gov.uk/kb5/hmrc/forms/view.page?record=DzyyGEG2vMk&formId=3480

Nine_Lives

She's paid via BACS afaik. She has payslips somewhere, i'll see if she'll dig them out.

I just followed that link Jem & stopped at this point:

"If you are an employer use form P46(Pen) to notify HMRC you are paying someone a pension"

My sisters employer aren't paying her a pension & likely aren't paying anyone they employ a pension either. It's a pension my dad had through his work that is paying my sister - JUST because she's in full time education (my brother 1 year younger than her at 19 gets nothing & myself at 28 get nothing - not that we expected anything).

So that line on that link implies to me that this form P46 isn't for her - as her current employer has nothing to do with these pension payments at all.

borkid

Hi I'm not sure if its the same for your sister but quite likely. Am I correct in thinking it's a teachers pension? I took my pension last Nov and I also did a little supply work, small pension and little supply so would not use up my tax free pay. Before xmas I received a tax form to fill in from tax office. Within 3 weeks I'd received a new tax code. Once she's returned her NI number I expect she hear from the tax office asking for details of her earnings so that they can give her a tax code for both the pension and work.

Mikeyorks

Capita are a pensions provider .... therefore an 'employer' in this respect as they're paying taxable income.

Must confess I'd missed the 'job' in your 1st post whilst studying the Capita letter. Approx how much does she earn per year / what is the Code on the payslips? As that potentially impacts how her allowances may need to be divided between the 'job' and the pension.