Help with understanding tax increase

fredtarp

I need help understanding why my income tax has increased so much this April.

I am a 74 year old female (75 in August). Last year my gross occupational pension was £412.53 per month and my state pension was £129.56. per week. The tax I paid was £15.60. per month.

This April my gross occupational pension has increased to £419.72. per month and my state pension to £133.56. per week. Small increases. My current pay slip shows I am now paying £24.60. per month income tax, which seems a very large increase.

The only other tax is on my current account which never has much in it as I use it to pay the bills. I also pay tax on a savings account of £2,000. The tax is deducted by the Bank and is very small. I also have an ISA on which no tax is payable.

As my rent has increased by £40 per month to £560. per month I am struggling.

Can anybody explain if this large tax increase is correct - figures are my week point!:(

jem16

fredtarp wrote: »

I need help understanding why my income tax has increased so much this April.

I am a 74 year old female (75 in August). Last year my gross occupational pension was £412.53 per month and my state pension was £129.56. per week. The tax I paid was £15.60. per month.

This April my gross occupational pension has increased to £419.72. per month and my state pension to £133.56. per week. Small increases. My current pay slip shows I am now paying £24.60. per month income tax, which seems a very large increase.

What tax code was used last tax year and what tax code is being used this tax year?

agrinnall

Ignore the spammer (Moon 968). As jem says, we need to know the tax code that was applied to your occupational pension in 2013/4 and the new one for 2014/5.

antrobus

fredtarp wrote: »

I need help understanding why my income tax has increased so much this April.

I am a 74 year old female (75 in August). Last year my gross occupational pension was £412.53 per month and my state pension was £129.56. per week. The tax I paid was £15.60. per month.

This April my gross occupational pension has increased to £419.72. per month and my state pension to £133.56. per week. Small increases. My current pay slip shows I am now paying £24.60. per month income tax, which seems a very large increase....

Your monthly income tax bill has increased from £15.60 per month to £24.60 per month, an increase of £9, suggesting that you are being taxed on an extra £45 of income a month.

I suspect you are in the situation where you have the same £10,500 personal allowance this year, as you did last year, so any increase in the state or private pension will result in a higher tax bill. £9 a month is not really that 'large' an increase.

jem16

antrobus wrote: »

Your monthly income tax bill has increased from £15.60 per month to £24.60 per month, an increase of £9, suggesting that you are being taxed on an extra £45 of income a month.

I suspect you are in the situation where you have the same £10,500 personal allowance this year, as you did last year, so any increase in the state or private pension will result in a higher tax bill. £9 a month is not really that 'large' an increase.

Yes but the pension increases only amount to £11.19 which would amount to an increase in tax of £2.24 and not £9 so whilst £9 is not a large increase, it's larger than it should be.

jem16

fredtarp wrote: »

The only other tax is on my current account which never has much in it as I use it to pay the bills. I also pay tax on a savings account of £2,000. The tax is deducted by the Bank and is very small. I also have an ISA on which no tax is payable.

As an aside, you're probably due a refund on some of the tax from the bank interest as the bank will deduct 20% and some of your savings should be liable for the 10% rate.

How much interest do you usually receive?

jennifernil

jem16 wrote: »

Yes but the pension increases only amount to £11.19 which would amount to an increase in tax of £2.24 and not £9 so whilst £9 is not a large increase, it's larger than it should be.

Pensions have increased by £7.19 per month + £4 per week, a total of £294.28 per annum, so @ 20% tax that would be an extra £58.86 per annum tax.

So an extra £9 per month is too high. The average would be about £4.90 extra per month.

antrobus

jennifernil wrote: »

Pensions have increased by £7.19 per month + £4 per week, a total of £294.28 per annum, so @ 20% tax that would be an extra £58.86 per annum tax.

So an extra £9 per month is too high. The average would be about £4.90 extra per month.

There isn't that much point in doing the arithmetic unless you know the exact details of the OP's other income, and their tax code (which, for example, might indicate the recovery of a previous underpayment).

The point I was making is that £9 extra tax, is only £45 a month of extra income, and isn't actually all that 'large;, so there are quite a variety of small things that could have happened, that could explain it.

fredtarp

Thank you for replies. My tax code last year was 376P and this year it is 355P.

jennifernil

That fairly accurately reflects the increase in your state pension, so sounds correct.

If you deduct £3550 from your annual occupational pension, take tax @20% on the amount left, then divide by 12, you should arrive at your monthly tax bill.

Doing this gives a figure of around £24.80, so your tax this year appears correct.

jennifernil

antrobus wrote: »

There isn't that much point in doing the arithmetic unless you know the exact details of the OP's other income, and their tax code (which, for example, might indicate the recovery of a previous underpayment).

The point I was making is that £9 extra tax, is only £45 a month of extra income, and isn't actually all that 'large;, so there are quite a variety of small things that could have happened, that could explain it.

I was only indicating that Jem had not calculated the increase and therefore increased tax correctly.