Tax coding for wrinklies income over £25k

bobthesod

with the phasing out of the 'extra' tax relief to pensioners over the next few years, i rang HMRC this morning and had a chat about this 'ceiling' of £25.4k over which we pay 10p per pound

It would appear that the Govt is being ageist because once our income exceeds this amount we are taxed on it, where an under 65 person who earns the same amount is not
I can understand that the tax code is reduced should we be in a position where our total pension income is above 10500,and whilst i think it is stinks that we pay tax on what, in effect, is a 'benefit', there are some people trousering more than this per week tax free from HMG.
As i see it
When the tax allowance bands level out for both under and over 65's and this 'ceiling' is still in effect, irrespective of what it may be, it follows that we will be taxed on age income, which must be wrong somewhere?
example using figures guessed at for year 2015/6, when the allowances are same at 10500 and the ceiling is ,say 30k and pension is 7500pa,and total income is 35k (private pension 20k,+7500 HMG +7500 part time job)
under 65 tax code 1050 take home 30100. ignoring NI contributions
over 65 take code 1050-750 (HMG pen)-250 (50% of additional income over 30k) 50. Take home 23600 Pensions)+6000 (from p/t job after tax) 29600
I realise that £500.00 insnt a lot ,but i still think its wrong.OR is it a hidden NI contribution?
Perhaps a more learned person could put me straight as to why this additional tax is being put on us?

Gracchus_Babeuf

What the hell are you moaning about? You have an excellent pension already - just be grateful you don't have to pay any NI contributions like workers do.

atush

It would appear that the Govt is being ageist because once our income exceeds this amount we are taxed on it, where an under 65 person who earns the same amount is not

an under 65 yr old, under the new allowances from nest year, will get 9,2K each, making their allowance just over 18K for a couple. So they too would pay tax on any of their 25K income above that.

So what exactly are you whinging about? It is a bit unclear?

dunstonh

Someone earning £25k over 65 wasnt getting much benefit from the age allowance anyway as earnings of that level saw the age allowance reduced by £1 for every £2 over until it ended up at zero.

Perhaps a more learned person could put me straight as to why this additional tax is being put on us?

In your case you stand to gain from the changes. Not lose out.

The age allowance reduction will not exist on those that do not get age allowance.

Bigmoney2

Currently those getting the additional age related personal allowance, have it eroded away if their income is over 24500 (pay be higher in next tax year).
OP is saying (i think) that if this stayes in place once the personal allowances for under and over 65's is equalised then over 65's will be treated less favourably i.e will in effect have a lower personal allowance/ pay more tax than those under 65.


I would have assumed ( I know never assume anything) that once the additional allowance has gone then the 24k ceiling would be removed

bobthesod

Grachus/Atush

as you will noticed i am a newbie.
as far as i can make this tax thing out, and BigMoney2 agrees with me, irrespective of what my pension etc is, i think that it is repugnant that i am expected to pay more tax over and above that which a person still working pays on the same amount of income.
i pay tax on my work pension. as my HMG pension is not taxed at source, my tax code on my works pension is rduced to take this into account.My part time work is taxed at 20%. All i think is ok. BUT the working guy under 65 can earn up to 34370 still at 20% BUT in over 65 cases the excess over 25400, the tax code is reduced by 1 for every £2 earned. This means i am paying 20% on that PLUS my taxcode is reduced so i pay more tax!
Perhaps you are not yet in this position,or rich enough not to worry, but as i said in my post, every bit helps.,and if i were lucky enough to have a total income of 34370 my tax code would be 1050-696-448 = -94 so i would pay tax on every penny of my income, but if you can prove that my calculations are wrong i would be more than happy to offer an apology .
As Bigmoney2 said, the only logical out on this is for HMRC to cease the upper limit pensioner earnings, bur when did any govt use it?

bilbo51

bobthesod wrote: »

Grachus/Atush

as you will noticed i am a newbie.
as far as i can make this tax thing out, and BigMoney2 agrees with me, irrespective of what my pension etc is, i think that it is repugnant that i am expected to pay more tax over and above that which a person still working pays on the same amount of income.
i pay tax on my work pension. as my HMG pension is not taxed at source, my tax code on my works pension is rduced to take this into account.My part time work is taxed at 20%. All i think is ok. BUT the working guy under 65 can earn up to 34370 still at 20% BUT in over 65 cases the excess over 25400, the tax code is reduced by 1 for every £2 earned. This means i am paying 20% on that PLUS my taxcode is reduced so i pay more tax!
Perhaps you are not yet in this position,or rich enough not to worry, but as i said in my post, every bit helps.,and if i were lucky enough to have a total income of 34370 my tax code would be 1050-696-448 = -94 so i would pay tax on every penny of my income, but if you can prove that my calculations are wrong i would be more than happy to offer an apology .
As Bigmoney2 said, the only logical out on this is for HMRC to cease the upper limit pensioner earnings, bur when did any govt use it?

I think you're just wrong. The over-65 personal allowance is reduced until it reaches the same level as the under-65 personal allowance at which point reduction stops. In the future when over-65s and under-65s have the same personal allowance, assuming the current budget proposals are enacted, no reduction will take place because they will be de facto equal in the first place.

dunstonh

i think that it is repugnant that i am expected to pay more tax over and above that which a person still working pays on the same amount of income.

You are not paying more tax. You are paying the same (or less if you think of NI as a tax). Can you identify the area you believe that makes you pay more tax than someone under 65?

BUT the working guy under 65 can earn up to 34370 still at 20% BUT in over 65 cases the excess over 25400, the tax code is reduced by 1 for every £2 earned. This means i am paying 20% on that PLUS my taxcode is reduced so i pay more tax!

No it doesnt. The age 65/75 age allowance is reduced by £1 for every 2 pounds over but only removes the age allowance. It does not remove the personal allowance.

atush

I think you need to go back to your calculator. You aren't paying more tax then them now, and you wont be later. And given you don't pay NI at all, you will always pay less tax- even when the allowances become equal.

Again, I do not see what your complaint is?

mgdavid

it appears his complaint should be about the standard of education he received, as along with the majority of people on various MSE threads whinging about the 'pensioners being taxed more' they simply fail to understand the words or the numbers.

ETA - looks like the government are going to have to work hard and spell it out again and again in order to get the message across

jem16

bobthesod wrote: »

if i were lucky enough to have a total income of 34370 my tax code would be 1050-696-448 = -94

No it wouldn't. As your total income is over the income limit for the age related allowance you have lost all of that age related allowance and are now back at the basic personal allowance of £8105 ( assuming tax year 12/13).

For tax year 11/12

If your 'adjusted net income' - read more below - is over £24,000 (the income limit for age-related allowances) but not more than £100,000, your age-related Personal Allowance is reduced by half of the amount - £1 for every £2 - you have over the £24,000 limit, until the basic allowance is reached

http://www.hmrc.gov.uk/incometax/personal-allow.htm

So your tax code is 810 - 696 ( state pension I assume) = 114L

so i would pay tax on every penny of my income, but if you can prove that my calculations are wrong

Under 65

Income = £34,370
Tax-free of £8105
Taxable at 20% is (£34,370 - £8105 =£26,265) £5253

Total tax paid is £5253.

Over 65

Income = £34,370
State pension (paid gross) is £6965 so £34,370 - £6965 is £27,405 taxable income.

Tax-free allowance of £1140
Taxable at 20 % is (£27,405 - £1140 = £26,265) £5253

Total tax paid is £5253.

Both under 65 and over 65 pay exactly the same tax.

i would be more than happy to offer an apology .

Over to you.