State pension and tax

kuepper

jem16 wrote: »

You also mention receiving Incapacity Benefit in another thread. I'm assuming your state pension now takes over from this but have you taken account of the fact that it's taxable too?

Yes I'd included my IB in my pension figure just to simplify the thread

jem16 wrote: »

And is the tax code 425L going to pay that amount? Did they work that out for you?

No idea, no they didn't work that out, why wouldn't it? How can I check myself?

kuepper

patanne wrote: »

So your state pension is approx £99 per week? That is what your tax code implies. If that isn't the case you really need to post at least approx figures as at this rate you are going to have a big tax bill to pay at the end of the year. No-one is going to track this back to you.

ETA My experience when starting to take my state pension was - original tax code only took into account my basic state pension, I later got a new tax code which reflected the FULL amount I was going to receive. I assume they received notification from the DWP of the final amount. Could this be what has happened in your case?

My pensions more than that i'm not prepared to say what. HMRC had the correct figure for it (basic plus S2P) but in one code notice they'd used the actual amount I will receive in 2013/14 and in the second code notice they used the amount I would receive if i'd been getting pension since 6 April which I haven't

jem16

kuepper wrote: »

Yes I'd included my IB in my pension figure just to simplify the thread

So presumably your IB ended at the same time your state pension started? In which case you should include the total amount over the tax year.

No idea, no they didn't work that out, why wouldn't it?

That's what we're trying to figure out to see if the tax code change was needed or not. HMRC must have changed it for a reason - that reason may be wrong or it may be correct. They may have initially worked out your state pension and didn't work out the IB included. They may be wrong.

How can I check myself?

Add up all your total income for the tax year. This will include IB, state pension, private pension, gross interest from savings, any investment dividends etc. Then work out the tax due on that total.

Use the 425L tax code to work out what tax you are paying via your private pension over the whole tax year.

If it matches - great. If not you have a problem.

kuepper wrote: »

I will hereafter be paying tax on every £ of income (pro rata of £7000 pvte £10000 state pa in round figures)

If your total income is £17k then a 425L tax code on £7k will not pay enough tax.

kuepper wrote: »

My pensions more than that i'm not prepared to say what. HMRC had the correct figure for it (basic plus S2P) but in one code notice they'd used the actual amount I will receive in 2013/14 and in the second code notice they used the amount I would receive if i'd been getting pension since 6 April which I haven't

And what about the IB? Where has it been included.

Kuepper, the offer is open if you want to use the pm method. If you don't I don't think there is much more we can do on this thread.

kuepper

Jem 16 - HMRC had always included IB in their calculation and showed pension in addition in each of the tax code notices, the only difference was in the second notice they added a full years pension to my IB not just the 7 months worth I will actually get. As i said I'd simply included the IB into the figure I quoted for the pension in order to not confuse matters and simplify my Q.

Thanks for your offer but i'll just see what happens when I get my next code notice and see it applied to my pension pay slip, i'll be able to see how things are calculating out myself then

jem16

kuepper wrote: »

Thanks for your offer but i'll just see what happens when I get my next code notice and see it applied to my pension pay slip, i'll be able to see how things are calculating out myself then

No problem.

425L tax code on a £7000 private pension = £548.20 in tax pa or £45.68pm.

That's the equivalent of £12180pa income.

brewerdave

Hijacking this thread slightly -how is the taxation of pensions normally treated in terms of allowances?
In my case, I currently am in receipt of one final salary pension so the allowance goes against that -but in ~18 months I will have that pension,my state pension and possibly 4 smaller private pensions in payment.

jem16

brewerdave wrote: »

Hijacking this thread slightly -how is the taxation of pensions normally treated in terms of allowances?
In my case, I currently am in receipt of one final salary pension so the allowance goes against that -but in ~18 months I will have that pension,my state pension and possibly 4 smaller private pensions in payment.

Your main pension which uses your allowance will see a deduction for the state pension.

Your other pensions will either be given a BR or D0 tax code depending on the total income.

margaretclare

kuepper wrote: »

many thanks for that explanation but as you've guessed would be the case I still don't really get it. I've never had any dealings with tax before now, just left it to trust if it seemed to be right but this didn't seem to be right. As for RTI hmrc correctly stated my exact state pension income for 2013/4 in the first tax code notice I got a few days after pension age so I don't get why a month later they've changed it and why my pension fund couldn't just use the first code for the rest of the tax year, surely with the revised code they will overtax me as I will hereafter be paying tax on every £ of income (pro rata of £7000 pvte £10000 state pa in round figures)

How have you never had any dealings with tax before? You said you'd paid NI for 40 years so you must have been paying tax for the same length of time - that means 'having dealings with tax'.

patanne

I think the problem is MargaretClare that the large majority of people never do have to deal with the taxman until they retire, it is all done by their employers on their behalf. I used to do wages for many years so I have some idea of the 'ropes' but personally I have only actually dealt with them when I had a benefit in kind & when the benefit in kind stopped (and back in the day when a woman got married & she became a separate person with 2 personal allowances in the same year). Now I am retired I have to file self assessment. To anyone without any prior knowledge or previous experience it must feel overwhelming.

yangptangkipperbang

I think a lot of people get confused with Tax on state pensions because the state pension is not taxed at source unlike all other pensions - but it still is liable to be included in "taxable income".

I have 4 pensions. State pension is not taxed at source, 2 others are taxed at Basic Rate. The largest of the pensions has my tax allowance set against it and my state pension is, in effect, added to that pension to give my tax liability after my allowance is used.

Why anyone would want to call this a "scam" escapes me !