Need advice for my father taking is miners pension please

acharris

Hi all I wonder if you can help me with 3 questions. MY father is 58 and is taking his Miners Pension from the MPS which was a private. He is claiming IB and DLA and he was wondering where he stands as it says that the pension is PAYE and you could pay tax.

1) Is this only in effect if he was working or will he have to even though he is not working and on IB and DLA?

2) It also mentions something about signing up with HMRC about primary and or enhanced protection, this is something we dont understand if it will effect him or not as by reading it deals with others pensions being recieved, which he has no other than his MPS.

3) How does the LTA work???

Thanks in advance for any advice recieved.

Anthony

Loughton_Monkey

Unless his pension value is above £1.8 million, then you should forget points 2 and 3. Everyone is allowed to build up pension pots to this large value and then vest them without any extra tax difficulties. This £1.8 million is the Lifetime Allowance [LTA].

The only implication for mere mortals is that we have to obtain, and then decalare to HMRC, the %age of the LTA every time we take a pension. It should always be quoted by the pension provider.

As to the first point, then pension income is always taxable, apart from the 25% (or whatever) lump sum. Your father is no different from any other 58 year old. All taxable income [which does not include DLA by the way] is added together and you start paying basic rate tax on the amount above the tax-free band. That's £7,475 this year, and £8,105 next tax year (from 6th April 2012).

HMRC will need a P161 form completed, and then they will issue a Code No. to the MPS. They will then deduct any necessary tax from the gross pension, just as if it were salary.

xylophone

http://www.mps-pension.org.uk/payment-pension.htm
"Taxation considerations

Pensions in payment are taxed under PAYE, although lump sums paid from the Scheme are generally free of tax. If you have another pension arrangement which has yet to come into payment, you may be asked how much of your Lifetime Allowance is taken up by MPS benefits before that pension can be paid without incurring very high tax charges. More information about the Lifetime Allowance is covered in the next section but if your pension is already in payment you can work out the value of your MPS benefits against the Lifetime Allowance by multiplying your annual pension by 25 and, if you left the MPS before 1 March 1992, adding any separate lump sum. If you retired after 5 April 2006, the Lifetime Allowance figure will have been quoted on your retirement statement."

You have said that your father has no other pension arrangements.
He will however need a tax code to set against his pension, just as he did when he was working and receiving a salary. This will be provided by HMRC to MPS so that they can deduct any tax due before paying him his pension.
http://www.hmrc.gov.uk/forms/p161-man.pdf
Your father will need to contact HMRC again when he starts to receive his state pension.

sleepless_saver

He must contact DWP when his pension comes into payment, as this is a change of circumstances which may well affect his IB. There will be no change to his DLA.

acharris

Thanks for the advice. After reading this and having a look around the net can someone tell me if I am near on my understanding.

I worked it out that my father will be £4,600 above the £8,105 with his IB and MPS, and basic tax is 20%, so by my calculations his PAYE will be £17.62 per week out of his pension will be paid.

Have I got it right or am I looking at the wrong figures?? Thanks.

sleepless_saver

Is his miners pension going to be more than £85 per week? If so, then his incapacity benefit will be reduced. If he gets a pension of more than £85 per week (gross) his IB will be reduced by half the amount over the £85.

Once you've worked that out, then you can calculate the tax due on https://www.listentotaxman.com . He won't have to pay national insurance and the DLA is not taxable.

ETA - The IB isn't reduced if your father was getting it before 6 April 2001 or is getting high rate care DLA. See link.

acharris

Thanks for that, but his MPS is only £67 odd a week so well under. But if reading right, my father was on invalidity benefit before it got changed to IB and plus he dont recieve nothing through the post about how much he has earned for that year (cant remember the P number now of the form) so if I read right, when he notifies HMRC they wont tax him as Invalidity was a non-taxable benefit according to direct gov.

But I think as soon as he gets his transfer to ESA then he will have to pay tax as ESA is taxable like IB if I am not mistaken. Can someone confirm if I am right? Also could some check my figures for me as on that site I get a tax of £20 p/w, his incapacity is £178 and his MPS is £67 (bar for a few pence) total of £244 p/w.

Thanks for helping me as this is something that is new to him and he dont fully understand things like this and the C.A.B was not much help to him.

Dunroamin

acharris wrote: »

Thanks for that, but his MPS is only £67 odd a week so well under. But if reading right, my father was on invalidity benefit before it got changed to IB and plus he dont recieve nothing through the post about how much he has earned for that year (cant remember the P number now of the form) so if I read right, when he notifies HMRC they wont tax him as Invalidity was a non-taxable benefit according to direct gov.

But I think as soon as he gets his transfer to ESA then he will have to pay tax as ESA is taxable like IB if I am not mistaken. Can someone confirm if I am right? Also could some check my figures for me as on that site I get a tax of £20 p/w, his incapacity is £178 and his MPS is £67 (bar for a few pence) total of £244 p/w.

Thanks for helping me as this is something that is new to him and he dont fully understand things like this and the C.A.B was not much help to him.

Have you allowed for his Personal Tax Allowance?

acharris

thanks for replying, I am slighty unsure what you mean, his person tax allowance is £7,475 now and this year £8,105 if that what you mean?? his total combined is around £12,700 per year with IB and MPS. Thanks agaain.

xylophone

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnBenefitsPensionsAndMaintenance/DG_10027059
"Employment and Support Allowance (ESA) can be taxable or non-taxable. If your ESA is contribution-based then it is taxable. If your ESA is income-related then it is not taxable.
Some people may migrate from Invalidity Benefit to ESA. If you move from taxable Invalidity Benefit to contribution-based ESA then the income remains taxable. If you move from non-taxable Invalidity Benefit or Income Support to contribution-based ESA then the income will become taxable. If you move to income-related ESA then the new benefit will not be taxable."

http://www.hmrc.gov.uk/manuals/eimanual/eim76180.htm
"IB is taxable except:

where IB is payable to a person who was entitled to invalidity benefit prior to 13 April 1995 (when incapacity benefit replaced invalidity benefit) provided the benefit is in respect of the same period of incapacity. (However, if the person was entitled to Sickness Benefit prior to 13 April 1995 then the IB became taxable when that person started to receive the short-term higher rate of IB.) The DWP may ignore short periods of work when determining a period of incapacity, but if a period of work is not ignored, so a recipient who had a period of incapacity before 13 April 1995 starts a new period of incapacity after that date, the IB will be taxable after 6 months under the normal rules.
As they know the details of the claim, the DWP is responsible for determining whether IB is taxable and notifying the Revenue when a person starts to receive taxable benefit. If there is any doubt whether IB is taxable, the person receiving the IB should be asked to seek clarification from the DWP.


If over and above the IB your father is only receiving £3484 per annum and has no other income and his IB is not taxed (see above for conditions) then his income is well below the personal allowance?
He should nevertheless contact HMRC in order to get his tax code?