State pension, pensions, salary and tax code

bigfreddiel

Okay, the notice of coding I received a few weeks ago is vastly improved from previous years.

Even I can understand it!

I have three streams of income, two occupational pensions and a salary.

So the tax coding started with my lowest income stream Pension A which is say £3,200 so it had a tax code of 320, so it's tax free.

My next income stream is Pension B which is say £9,800. So this eats up the remaining part of my allowance with a tax code of 780 - okay I know I've left off the letter, but I can't remember what it is.

Finally my salary is taxed at BR.

All very simple.

Now my question, when my SP starts in July £8k approx, will I be issued a new coding structure so my sp will be tax free effectively, followed by Pension A with a small amount of tax, and Pension B and salary taxed at BR?

Cheers fj

Darksparkle

Most likely.

kidmugsy

bigfreddiel wrote: »

when my SP starts in July £8k approx

jamesd will spank your botty for not deferring.

agrinnall

Even if your coding does get reviewed when your SP starts I've seen plenty of cases on here where in the first year it ends up being not quite right, so you should make a note to check the tax you have paid in 2016/7 after April 5th 2017.

polymaff

kidmugsy wrote: »

jamesd will spank your botty for not deferring.

defer a new state pension?

xylophone

defer a new state pension?

Still possible but the reward is not as tempting....
https://www.gov.uk/new-state-pension/eligibility

kidmugsy

polymaff wrote: »

defer a new state pension?

Yup, jamesd sees a case for it in some circs. I suppose that if you want an index-linked annuity it offers the best value around unless you have health worries. (And some people will want to do it to avoid tax until they stop working.)

Deferral on the old-style pension is just unbeatably good for many people - though there have been plenty of dolts on these threads who seem incapable of grasping the point.

polymaff

With a break-even about 17 years after the end of deferral - well - do you feel lucky?

MDMD

bigfreddiel wrote: »

Now my question, when my SP starts in July £8k approx, will I be issued a new coding structure so my sp will be tax free effectively, followed by Pension A with a small amount of tax, and Pension B and salary taxed at BR?

Cheers fj

You will get a new code, although it's s little complex in the first year. The amount of the SP will go in the code, so you get it paid gross, and the tax is collected via the personal allowance restriction before it is allocated to PAYE sources. You may find that the actual amount in the code differs from the actual amount received, as they may use an annual equivalent amount in a non cumulative (month 1) code to collect the correct proportion of the tax. See 4th and 5th bullet here:

http://www.hmrc.gov.uk/manuals/pommanual/PAYE76086.htm

FOREVER21

agrinnall wrote: »

Even if your coding does get reviewed when your SP starts I've seen plenty of cases on here where in the first year it ends up being not quite right, so you should make a note to check the tax you have paid in 2016/7 after April 5th 2017.

Completely agree, I was one of the individuals who ended up with an underpayment of tax due to problems with incorrect coding following the payment of my state pension.

The O P should not wait until the end of the tax year but he should contact HMRC shortly before his state pension is due and they will forward him a form to declare his expected income post payment of state pension.

Having said that I forwarded them my details well in advance and they still got it wrong.