65-74 Tax Codes

cadenza82

Last month, Dad turned 65. He is currently continuing to work, and in addition draws the state pension and a pension from a previous job. The total of these three combined is about £42,000.

Having a look at tax calculators online for 2012/13, he should be due a personal allowance of £8,105 which makes the annual tax payable about £6,779.

HMRC had previously sent a tax code of 794L which has just been replaced by 10L. We're having some difficulty working this out - with a tax code of 10L, he'd be paying just short of £10,000 in tax a year. According to their calculations, the personal allowance would reduce to £109 with an adjustment to tax rate bands (£1,715), savings taxable at a higher rate (£8), state pension (£6,109) and taxable expenses (£164) being deducted from the £8,105 personal allowance. This seems to arise from the factor of the state pension not being taxed at source.

Can anyone shed any light on this? If the 10L tax code really does apply, he'd be almost better off retiring now because it seems like putting money down the drain because of being in the higher tax bracket.

David

Lovelyjoolz

I don't understand that. If your dad is now 65, his personal allowance for 2012/13 will be 10,500 not 8,105.

Are you sure this code isn't for 2011/12?

Mikeyorks

cadenza82 wrote: »

HMRC had previously sent a tax code of 794L which has just been replaced by 10L.

Presumably your £42k included the State Pension? So the reduced personal allowance only operates against circa £36k - as the tax on the State Pension is already accounted for.

But there should be 2 x codes? One for his current job and one for his previous works pension. The Coding Notice suggests (adjustment to rate bands) he's recently completed a P161.

Lovelyjoolz wrote:

his personal allowance for 2012/13 will be 10,500 not 8,105

.

No. The age related allowance is also income related. At £42k it retreats all the way back to basic.

cadenza82

Mikeyorks wrote: »

Presumably your £42k included the State Pension? So the reduced personal allowance only operates against circa £36k - as the tax on the State Pension is already accounted for.

But there should be 2 x codes? One for his current job and one for his previous works pension. The Coding Notice suggests (adjustment to rate bands) he's recently completed a P161.

Yes, the £42k included the state pension. As far as I understand, the code is for the total for everything. I wonder if this is because his current employer is the same employer who pays the pension (he took early retirement at 58 and began drawing that pension, but went back to the same employer, part time in a different post). According to HMRC they take tax off the highest 'earnings' which in this case would be this pension.

He did complete a P161 a few months back. Following that, they sent a code of 794L for 2012/13 and this has now been revised to this new 10L.

Mikeyorks

The 10L will work if the pension + pay are being paid on the same payslip. If not - separate Codes are needed.

If they 'took tax of the highest earnings' - being the pension ...... then his part time earnings would also have to be coded out, just as the State Pension has been.

cadenza82

If we just forget the coding for a minute, what's the best way to work out at a basic level, what tax would be payable. If I put the total of £42k into any of the online tax calculators, I'm getting a total tax of about £6,779, but introducing the 10L code makes this much higher because of the higher tax band.

Or, is what you're saying that the the state pension is taken off the personal allowance, and off the total income, so, in other words, the tax is then only payable on the total income minus the state pension?

So far as I know, they are on the same payslip which might account for their only being one code.

I think I'm probably being very dumb about this!

agrinnall

cadenza82 wrote: »

So far as I know, they are on the same payslip which might account for their only being one code.

I think I'm probably being very dumb about this!

What 'they' are you referring to? The state pension will never appear on a payslip received from an employer, in fact I don't think there is any communication about state pension on a regular basis other than the annual notification of what the payment will be in the next year. From what HMRC have told you I would say 10L on the combined income from employment and private pension is correct.

mumblub

sorry if im jumping in on anyone..but could i please ask what tax code 761L is ? does it mean dh is not paying enough tax...thank you for any replys :T

jem16

mumblub wrote: »

sorry if im jumping in on anyone..but could i please ask what tax code 761L is ?

It means you have £7615 of tax-free allowances.

does it mean dh is not paying enough tax...thank you for any replys :T

Not enough information to say.

What age is dh?
Does he have a state pension?
What is total income?

mumblub

hi jem hes 44 im not sure about the pension bit..but i know he gen earns after tax and all £248 a week ..sorry if im been dumb about this he gets that normal bin man rate

mumblub

im really worrying now that he has underpaid his tax..up until a couple of hours ago i was thinking he could possibly reclaim the tax relief for his work uniform that is when i noticed his tax code wasnt the standard 745l now im just stressing about it