nhs pension

hansea

I hope this is posted in the correct place . I am a bit confused since receiving my state pension. I have been in receipt of my nhs pension for 8 years but have now started receiving the state pension since 26th November. I was informed of a change in tax from the nhs at the end of December which resulted in a change in payment. Lower by £32.80 a month. So I thought I did not pay additional tax on my state pension for 6 weeks which obviously has to be paid but the hmrc say on one form I owe £389 and on another £1947 which is called a payment restriction. I can provide further details if required. I can't get any sence from tax people as they say I need to pay a separate tax on my oap but I thought it would all come from the nhs pension. I am totally confused Thanks

jem16

hansea wrote: »

hmrc say on one form I owe £389 and on another £1947 which is called a payment restriction. I can provide further details if required.

By altering your tax code by £1947 this will mean you will pay more tax at 20% on that amount. 20% of £1947 is £389.40 which is the amount owed.

All seems well with that.

hansea

what I don't understand the is when the nhs altered the amount they took why did they not take the correct amount to prevent the money I owe accumulating. I am sure the £389 cannot possibly have been for the 6 weeks prior to the increased amount taken by the nhs or is it for the time to end of march this year?

jem16

hansea wrote: »

what I don't understand the is when the nhs altered the amount they took why did they not take the correct amount to prevent the money I owe accumulating.

NHS pensions had nothing to do with the amount taken. They only used the tax code supplied to them by HMRC and it was probably done as a non-cumulative tax code to prevent a large amount of tax being taken in the first month it was used.

I am sure the £389 cannot possibly have been for the 6 weeks prior to the increased amount taken by the nhs or is it for the time to end of march this year?

Assuming the new tax code did take account of your pension, then tax should have been correct from then on. I would be expecting the underpayment then to be over that 6 week period but without actual figures it is difficult to be precise.

If you would give the figures for total gross payment from the NHS and total gross payment from the state pension plus the total tax paid, we could check the figures.

hansea

state pension £6526 per annum
april 2015 nhs per month £1695 .24 gross
tax 162.20
net 1533.04


dec 2015 (after commencement of oap)
gross 1698.59 per month
tax 205.60
net 1492.99


this is why I wondered how I owe the tax as the only over payment I can figure out was at the end of November after receiving the oap from 6/11 to 24/11

hansea

and code for april was1060L and dec 803L M1

jem16

hansea wrote: »

and code for april was1060L and dec 803L M1

With a state pension of £6526 I would have expected your tax code to have reduced to 407L - ie £10600 minus £6256 which is £4074 resulting in a tax code of 407L. So even from December you were still paying too little tax. What did your P2 Coding notice that explained the 803L M1 code say?

However I'm confused as to exactly when this £389 underpayment is for. We've not yet reached the end of this tax year so it's unusual for any underpayment to have been worked out as yet. You mentioned paperwork for this - what tax year does it refer to?

xylophone

The OP did not start to draw his state pension until some point in December 2015.

Presumably the DWP advised HMRC of the amount to be paid for the final 20 (?) weeks of the tax year 2015-16 and HMRC sent a code to NHS pension administrators to ensure that the correct amount of tax was paid in year?

For the tax year 2016-17, if he deducts the amount of his state pension from £11,000, he should know what the code for the new tax year should be.

jem16

xylophone wrote: »

The OP did not start to draw his state pension until some point in December 2015.

OP says November 26th.

Presumably the DWP advised HMRC of the amount to be paid for the final 20 (?) weeks of the tax year 2015-16 and HMRC sent a code to NHS pension administrators to ensure that the correct amount of tax was paid in year?

That's not the way it's usually done though. Usually they take the year's payment and apply the tax code on a Mth1 basis which would see the correct tax taken from then on but will not look to take the previous months.

The OP only paid an extra £43 tax for the month of December which would not collect enough tax on the state pension.

xylophone

OP says November 26th.

He does, but refers to December in post 5 - perhaps the pension became payable from November but not received until December.

With regard to the Notice of Coding, I know of a case where the state pension payment increased in August (top up bought) and HMRC sent a new code to the occupational pension provider - this later required further adjustment.

The OP could try calculating his gross state and occupational pension for the tax year 2015-16, and deducting his personal allowance - 20% of the balance would be due in tax. He can then compare this with what he actually paid.

jem16

xylophone wrote: »

He does, but refers to December in post 5 - perhaps the pension became payable from November but not received until December.

I read that as the new tax code was being used in December after state pension started in November.

The OP could try calculating his gross state and occupational pension for the tax year 2015-16, and deducting his personal allowance - 20% of the balance would be due in tax. He can then compare this with what he actually paid.

From the figures provided earlier;

NHS pension = £20,383.08
State pension = £2406.15
Total = £22789.23

Minus £10,600 personal allowance = £12,189.23
Tax @20% = £2437.85

Tax paid from April to November = £1297.60
Tax paid from December to March = £822.40
Total = £2120

Tax underpaid = £317.85

These are only rough figures but broadly in line with the underpayment mentioned. The OP should have received a calculation of how the £389 underpayment came about but I am surprised it's been done so early considering we're not at the end of March yet.