ension and PAYE - BR & 988L tax Rate

devilslayer

Hi,

I currently have a Pension (Military) which gives me just over £1000 after tax, which is taxed with a tax code 988L

I also work full time for a driving agency and i am taxed BR rate on my earnings (£1200 to £1800 per month, after tax, depending on hours worked / job availability etc).

My question is this..

Which of these should be taxed at BR rate and which at the 988L rate.

Is it better to have the income that provides the most cash taxed at 988L?

Currently:

Pension taxed at 988L
PAYE taxed at BR

Would it be better:

Pension taxed BR
PAYE taxed at 988L

or

Doesn't it really matter?

Best Regards

Dave

booksurr

it makes no difference.

you are entitled to £10,000 per year tax free. Both your jobs patently are for more than £833.33 per month (ie. 10,000/12) pre tax since each leaves you with over £1,000 post tax, therefore each would fully absorb the tax free element on their own meaning the other job must be at BR, so it matters not which job gets it

incidentally why are you on code 988 rather than 1000? That means you have £120 of taxable benefit for this year

PS with post tax earnings of 1,800 per month your are certain to exceed the higher rate tax threshold so be aware that you are actually underpaying tax using BR rate so keep some money back to pay the extra tax with - HMRC will notice since both incomes are PAYE and they will add the 2 together so if the gross taxable (ie pre tax but after any pension deductions) total income is more than 42,865, you will owe tax at 40% on the excess over that threshold

patanne

Provided your pension is over the personal allowance then, as that income is permanent, it would be the sensible place to use your full allowance. It makes no difference to the amount of tax you will pay and if you should decide to, for example, take 6 months off paid work, then you will not need to make any changes to your tax affairs. I assume you know why your tax code is 988L instead of 1000L!

devilslayer

I did have a letter a while back stating that I underpaid tax, i think they altered it so that i paid it back.

On my Advice of Payment from my pension provider it states

2014 NEW YEAR TAX CODE CHANGE FOR YEAR

patanne

So all you need to do is check that next April you receive the full tax code again.