Help with tax code of 85 yr old

Anastasia

Hi everyone. Can you please help with some questions about tax codes?

My father died 2 weeks ago and we are currently sorting out finances for my mother. He was receiving around £6,900 in pension and his last P60 for year ending April 2011 shows his tax code is 647T and consequently he has been paying tax. I thought the tax code should be higher. He was 85. My mother is 75 and receives a small pension of around £250 per month and they were married.

On the HMRC website it says personal allowance for over 75s was £9,490. What do you think? Is the tax code right?

Thank you in anticipation.

Mikeyorks

It doesn't look right, from your limited detail.

The age related personal allowance is clawed back where someone's income exceeds £24000 (by £1 for every £2 over) ...... and does go all the way back to the basic allowance of £7475 (Code 747).

Was his income (from all sources) £29230 - or more? As that would pull it all the way back to the basic.

(Apologies - have given you the figures for 11-12. Same principle applies. The 'T' after the Code does indicate that the allowance has probably been reduced for that reason))

Anastasia

Thank you for your quick reply.

It has just occurred to me that he would presumably have had a state pension as well. We haven't talked about that as a family. It is the works pension that will continue to pay out to my mum at a reduced rate.

The work pension was £6,900. I don't know what the state pension was. I don't recall any other amounts on his bank statements. I can check. He had no other income from investments etc.

Mikeyorks

Anastasia wrote: »

It has just occurred to me that he would presumably have had a state pension as well. .

Indeed. But that is not going to push the £6.9k up to the £29k mark. And - in addition to the personal allowance the Married allowance was probably also relevant?

You need to try and pull the whole picture together over the next week or so. In particular look for a P2 (Coding notice) as that should paint a bigger picture? If the 647T already has the State Pension coded out - and the income is just the 2 x pensions - the damage is probably slight. Less than £100 tax paid in the year?But it may have been going on a while?

Try and flesh the picture out a bit and post back?

You are going to have to complete an R27 (Potential repayment to the Estate) at some stage - for the current tax year. Needs the bigger picture sorting before that.

Anastasia

Thank you so much.

I will be able to get more info on Friday when I see mum. Don't want to do it over the phone and stress her out. Will post back then. It is around £80 tax for the year ending 2011 but my main concern was how long it has been going on for. She needs any help she can get right now.

xylophone

http://www.hmrc.gov.uk/incometax/married-allow.htm
http://www.hmrc.gov.uk/pensioners/pension.htm
http://www.hmrc.gov.uk/rates/it.htm
might be worth a look.

sleepless_saver

When your mum feels up to it and knows how much pension she will be getting from your father's occupational pension, it would be worth getting her along to CAB for a benefit check, or use this benefit checker.

If she is living alone now, she will in any case be entitled to 25% discount on council tax and can apply for that right away.

Anastasia

Thank you. I don't think we have looked at the council tax yet.

Mikeyorks

Anastasia wrote: »

It is the works pension that will continue to pay out to my mum at a reduced rate.
.

1. Some pension providers pay a bereavement grant. Specifically, normally, to deflect funeral costs. Worth a check sooner rather than later?
2. You may hopefully find that the inherited pension, from your fathers provider, is a little more than expected. My mother was in the same situation a few years ago and I was a bit bemused to find they paid her slightly over 90% as a continuing pension.
3. Back to the tax. When the death was registered you get a form BD8. Which you send to DWP to notify cessation of the State Pension. They should look at your mother's State Pension, as a consequence of that, to see if it needs uprating. But they also advise (or should) HMRC of the cessation of the State Pension. That - in turn - should trigger issue of the R27. Reading between the lines (to the effect the age allowance may not have been allowed) it may be worth giving them a ring (with your mother there) to initiate a claim for overpaid tax for years prior to the current year (the R27 deals with that). Because - HMRC are mid-process in bringing down the number of years you can claim back, from 6 to 4. And 06-07 expires wef 31st March 2012.

http://www.hmrc.gov.uk/incometax/overpaid-thro-job.htm

During that call - it may be beneficial to log yourself as the 'personal representative' if you want to at least deal with the tax side? You haven't clarified who is the Executor or whether Probate will be needed. There's some internal HMRC guidance here and there's a bit of a 'cart and horse' potential dilemma :

http://www.hmrc.gov.uk/manuals/idgmanual/IDG34100.htm

...... as you really need to at least file a transient claim for the back years - before you get the R27 done. The simple alternative (once you've unearthed a P2) is to merely write a letter for Mum to sign - and get that off fairly quickly. That establishes the claim prior 31st March and leaves some relative leisure to get the R27 completed.

Anastasia

My eldest brother is the Executor but another brother is dealing with the work pension. The will is very straightforward. Mikeyorks - there is so much here. Thank you. I am going to print it off to show them and go from there. I would prefer to deal with the tax side of things but it may be better if one person does everything.

Mikeyorks

Anastasia wrote: »

but it may be better if one person does everything.

I do tend to agree with that as I always decline to be an Executor with anyone else. Committees are a bit unwieldy I find - in these circumstances.
But if you have the better grasp of the tax aspect ..... better that someone with knowledge addresses it?

Unfortunately the whole financial bit interlinks? I found myself, with Mum, establishing their precise income / expenditure before death - and then afterwards. In order to prove - to both of us - that she could afford to live on what was coming in. Fairly worthwhile exercise - despite the detail. As it clearly demonstrated she had no real issues.