Split tax code has demotivated me from looking for work

barbara22

I am unemployed at age 60 (unfairly dismissed and settled out of court at employment tribunal) and in order to clear outstanding debts I took an old and very small company pension early.

Just received letters from HMRC advising that they have split my tax code for the year 2012 - 2013 between the pension (which now has the tax code of 500T) and my ex-employer :eek: (which even if I were still employed by them, would now be 310L).

I have been searching for another job, even if only part-time, but now feel that it's not worth working as I will presumably be heavily taxed on any earnings.

I'm due for state pension early in November this year but would have liked to earn a little more to boost my bank account in the interim, or even worked longer if possible.

Is there something wrong here?

jem16

barbara22 wrote: »

I have been searching for another job, even if only part-time, but now feel that it's not worth working as I will presumably be heavily taxed on any earnings.

You won't be heavily taxed. You will receive £3105 of tax-free allowance and then 20% or higher tax on the rest.

Your pension meanwhile will receive £5000 of your tax-free allowances. Presumably your pension is around £5000pa?

Is there something wrong here?

Nothing that I can see unless you receive much less than the £5000 being allocated to your pension.

You are basically receiving the correct personal allowance. It is just being solit over your two incomes so that you pay the correct amount of tax and don't overpay by allocating all of your personal allowance to one income which doesn't use it all up.

Mikeyorks

The split tax code makes no overall difference on the amount you pay in tax over the year. Except - of course - where you're not using some of the allowances owing to unemployment.

The pension - your State Pension idc and your employment income are all taxable. And you only have the one personal allowance to set off against the totality. But it does need to be split in a way that ensures you are using all of it. Otherwise you overpay and have to reclaim after the year end.

How much is the pension (annual amount)? So we can judge if £5000 of allowances set off against it is correct. And are you receiving JSA? If so - did you give them your P45?

Edit - Jem got there first!

getmore4less

Don't forget once you hit state pension you no longer pay NI that makes working even more worth while allthough low earning per job don't pay NI anyway.

barbara22

jem16 wrote: »

Your pension meanwhile will receive £5000 of your tax-free allowances. Presumably your pension is around £5000pa?

My pension isn't even £1000pa (it's actually less than £600 a year), I had to take the maximum lump sum to pay off debts and the pension itself was very tiny to start with - I was only in the scheme for a few years before the company went in to liquidation.

That's partly why I am looking for work still. I no longer qualify for JSA and cannot claim income based support as my partner works.

Can I get HMRC to re-allocate the split so that it's more fairly balanced?

agrinnall

barbara22 wrote: »

My pension isn't even £1000pa (it's actually less than £600 a year), I had to take the maximum lump sum to pay off debts and the pension itself was very tiny to start with - I was only in the scheme for a few years before the company went in to liquidation.

That's partly why I am looking for work still. I no longer qualify for JSA and cannot claim income based support as my partner works.

Can I get HMRC to re-allocate the split so that it's more fairly balanced?

That's exactly what you should get them to do, they should never code for more than the value of your pension because, as you have found, it makes any other work you do overtaxed (although you'd get it back at the end of the tax year).

barbara22

agrinnall has it! Even if you're not a Scot, you're as canny as one - thank you :money:

Mikeyorks

barbara22 wrote: »

Can I get HMRC to re-allocate the split so that it's more fairly balanced?

Yes. The P2 tells you to contact them if any of the detail is wrong?

Give them the annual pension figure and ask they allocate a Code just sufficient to cover it. The rest against employment