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Two annuities, too much tax

2

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  • Vortigern
    Vortigern Posts: 3,287 Forumite
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    jem16 wrote: »
    The point I was trying to make was that HMRC will always use BR or D0 for a 2nd income until they are made aware of reasons not to. Usually you have to ask them to split the tax code.

    I now know that he'll have to ask them to split his tax code, but I still can't help feeling that either the pension company or HMRC could have done more to prevent this from happening - both know his national insurance number.
  • System
    System Posts: 178,229 Community Admin
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    Vortigern wrote: »
    I now know that he'll have to ask them to split his tax code, but I still can't help feeling that either the pension company or HMRC could have done more to prevent this from happening - both know his national insurance number.

    If HMRC are aware of him only having the 3 sources then yes they should have done something regarding his tax codes earlier. His pension provider have nothing to do with it because they don't know his other income and it is none of their business. It's between your F-I-L and HMRC to sort out. Get him to contact them asap so he claim back as far as possible.
    This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com
  • Vortigern
    Vortigern Posts: 3,287 Forumite
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    Pam17 wrote: »
    His pension provider have nothing to do with it ...

    Whilst I agree that the pension company won't know of his other income, they should know that his tax code is more than enough to make both his annuities tax-free and they know that his larger annuity is taxed at BR. They could have used the code against the larger annuity. At the very least they could have suggested he contact HMRC. There's more to good customer service than answering the phone in 15 seconds.
  • zygurat789
    zygurat789 Posts: 4,263 Forumite
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    Vortigern wrote: »
    Whilst I agree that the pension company won't know of his other income, they should know that his tax code is more than enough to make both his annuities tax-free and they know that his larger annuity is taxed at BR. They could have used the code against the larger annuity. At the very least they could have suggested he contact HMRC. There's more to good customer service than answering the phone in 15 seconds.

    No they have to do as they are told by HMRC and HMRC have to do what they are told, regarding splitting the code number, by the taxpayer.
    HMRC will have told the pension provider exactly what to do and the pension provider has to comply.

    This is entirely down to HMRC, they have a big computer system just to catch people with multiple incomes not paying enough tax. Shame it doesn't appear to work in the favour of the taxpayer. Yes there is more to good customer service than answering the phone in 15 seconds but HMRC won't have a clue about what it is for another century or so.
    The only thing that is constant is change.
  • xylophone
    xylophone Posts: 45,427 Forumite
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    Yes there is more to good customer service than answering the phone in 15 seconds but HMRC won't have a clue about what it is for another century or so.

    https://forums.moneysavingexpert.com/discussion/4431425
    He contacted HMRC tonight about it all and got a very nice person to go through it all when he explained the circumstances. It turns out that he has actually OVERPAID by over £1100!!!

    The age of miracles has not passed.......:T
  • Vortigern
    Vortigern Posts: 3,287 Forumite
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    zygurat789 wrote: »
    No they have to do as they are told by HMRC...

    Then I would argue that by issuing taxcode 497Y HMRC have told PensionCo to disregard £4977 of the income they pay to the individual identified by the NI number on the notice of coding.
    This is entirely down to HMRC...
    Not sure about entirely. PensionCo could have helped and HMRC must be under pressure with the government cutting jobs in the public sector. If we had more taxmen would HMRC collect more tax?
  • jem16
    jem16 Posts: 19,494 Forumite
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    Vortigern wrote: »
    Then I would argue that by issuing taxcode 497Y HMRC have told PensionCo to disregard £4977 of the income they pay to the individual identified by the NI number on the notice of coding.

    No they haven't. They have told the pension provider to use the tax code 497Y against a specific annuity as that is what has been requested. They have also told them to use the BR code against the other annuity. Each is a separate payslip and therefore a separate taxcode. The same thing will happen with an employee with 2 separate jobs and two separate payslips within the same firm.

    Were both annuitites set up at exactly the same time or different times?
    Not sure about entirely. PensionCo could have helped and HMRC must be under pressure with the government cutting jobs in the public sector. If we had more taxmen would HMRC collect more tax?

    It would also have helped if your father-in-law had kept an eye on his tax affairs as ultimately it is his responsibility. If f-i-l isn't able to do this, then a family member could help as you are now doing?
  • jem16 wrote: »
    Were both annuitites set up at exactly the same time or different times?
    Possibly at different times, but I can't find all the paperwork. The larger annuity (taxed at BR) has been in payment since 1988. I have seen P60s back to year ending Apr 2001 for both annuities. Strangely, the P60s for the larger annuity do not quote any National Insurance number. Also the Tax Reference on the P2 notices of coding does not appear in full on any P60. Is this normal?
    It would also have helped if your father-in-law had kept an eye on his tax affairs as ultimately it is his responsibility.
    I won't argue with that. Perhaps he just has an older persons misplaced trust in institutions like banks, insurance companies and HMRC :(

    Moving on, he's filed an R85 with his building society - they say they'll credit back the tax paid for this year and produce statements of tax paid for earlier years. We also rang HMRC - they couldn't sort it out on the phone, so he has to write to them, requesting split codes, with R40s for refunds and Form 64-8 to appoint me as his agent.
  • jem16
    jem16 Posts: 19,494 Forumite
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    Vortigern wrote: »
    Possibly at different times, but I can't find all the paperwork. The larger annuity (taxed at BR) has been in payment since 1988.

    Was your father-in-law still working when the first annuity was set up?
    Strangely, the P60s for the larger annuity do not quote any National Insurance number. Also the Tax Reference on the P2 notices of coding does not appear in full on any P60. Is this normal?

    With mine it does appear in full. No idea if it's normal or not.
  • Vortigern
    Vortigern Posts: 3,287 Forumite
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    jem16 wrote: »
    Was your father-in-law still working when the first annuity was set up?

    Depends what you mean by 'set up'. He was self-employed and started paying into Section 226 policies in 1978 at 50 years old while still working. These were intended to pay out at age 70, but he had to retire early due to heart problems. He took a lump sum and reduced annuity income at 60. The 5 policies that I've seen were combined to give the larger annuity. The other policy (which I haven't seen) gives the smaller annuity. The policy number for this is not from the same sequence of numbers as the other five. I wonder if it could be a different sort of policy, maybe a purchased life annuity from the proceeds of the sale of his business? Both annuities were taxed at basic rate until 2007 when annuities were moved to PAYE, at which time a tax code was allocated to the smaller annuity only. I don't believe he's had any income since retirement, apart from the basic state pension, 2 annuities and the diminishing returns from his savings.

    Thanks for your continuing interest.
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