two pensions, how am I taxed?

moneylover

I am retiring on 5th April and taking my Local Government pension and state pension from then on. My work pension is much smaller than my state pension but big enough for the tax to come out of it that will be payable once the two pensions are added together. Its complicated by the fact that I have extra state pension due because I did not take the state pension at 60 (I am now 66). I rang DWP to fill in all the paperwork over the phone and apparently to begin with I will only get the basic state pension. Then about three week laterthey will get around to doing a calculation as to what lump sum/weekly pension woould be. Am not allowed to tell them which I want beforehand! So presumably a couple of months before all this runs smoothly.
Presumably HMRC will be informed by both pension providers and I will get a tax code and then have to pay back some money when the full state pension comes through, backdated to 6 April as the state pension isnt taxed at source as far as I know. Can I expect all this to happen automatically or should I phone HMRC at some point? I don't want to jump the gun and end up filling in a tax return unless strictly necessary.
Many thanks

nomunnofun

Although not competely the perfect solution to the problem the attached form will most likely be issued to you in any case and will keep tax matters correct. Use box 18 to provide as much information about your state pension as possible. The reference in the top left can be obtained from payroll department dealing with the local government pension who should also provide the address of the relevant tax office.

The alternative is to wait until you know the full details and write to HMRC - could take a while before fully actioned.

http://www.hmrc.gov.uk/forms/p161-man.pdf

JezR

There is one wrinkle in these situations as no more than half of the work pension can be taken as tax via PAYE; if your tax liability over all pensions is more than this you have to pay the rest via self-assessment.

You may well have taken this into account when you said it was big enough but thought it worth mentioning just in case as even some people in HMRC don't seem to appreciate this situation.

moneylover

thank you both, no I had no idea of that little possible self assessment wrinkle, I wonder why that is. Why drag people into self assessment needlessly more cost to HMRC. My work pension will be circa £320 a month and my state pension about £850 so should I just about be ok given the personal allowance? And it so, will it all happen automatically? Thank you
Many thanks

xylophone

Although not competely the perfect solution to the problem the attached form will most likely be issued to you in any case and will keep tax matters correct

As the OP is already 66, should this form not already have been completed in the tax year she turned 65?

http://www.hmrc.gov.uk/rates/it.htm

http://www.hmrc.gov.uk/pensioners/pension-statepension.htm

The pension service should tell HMRC the amount of your state pension and a tax code should be issued to the occupational pension payer.

You should receive a Notice of Coding from HMRC to show the code which will enable the correct amount of tax to be taken.

Check that it is correct.

moneylover

thanks, yes, I didnt get a form from Tax Office or think of sending one but my tax code was corrected anyway and I got a rebate. So that is sorted.
Hoping that my tax will be less than half my occy pension on the figures I have so that I can be taxed that way.

JezR

Personal allowance for 2013/14 is currently set at £10,500 for people over 65 at the start of the tax year. Your monthly income from above is £1170, of which £295 is taxable @ 20%, ie £59. This is less than half of the value of pension paid through PAYE, so no self assessment required with everything handled through the PAYE tax code.

The 50% limit is somewhat arbitrary and has been recommended to be abolished as it pulls many people who have had simple PAYE-based tax all their working lives into self-assessment. These are mainly people who have fairly trivial personal /work pensions and significant state pensions such as maximum SERPS/S2P. Those with only large state pensions will have to continue with self-assessment as the option of moving all state pensions into PAYE was rejected.

moneylover

perfect, thank yu all questions answered now!