Are Army Pensions Taxable?

pg_tips

Hi all,
Are army pensions taxable? ...
I started receiving my army pension last year, (I am also in full time employment) on my annual letter it stated my tax code of: 1069L M1, although I was never taxed on my pension throughout the year.

I have now just received this years letter and it has stated my tax code of: 1T and at the bottom it shows about 20% deductions from my monthly pension.

First question is are army pensions taxable? If so, why wasn't I taxed on it throughout 2015.
Second/third questions are, why has my tax code changed to 1T and what does 1T mean? This isn't my normal tax code : /

Any help would be must appreaciated. I have tried searching online for 1T tax codes but couldn't really find anything to explain it.

Thank you in advance

CLAPTON

pg_tips wrote: »

Hi all,
Are army pensions taxable? ...
I started receiving my army pension last year, (I am also in full time employment) on my annual letter it stated my tax code of: 1069L M1, although I was never taxed on my pension throughout the year.

I have now just received this years letter and it has stated my tax code of: 1T and at the bottom it shows about 20% deductions from my monthly pension.

First question is are army pensions taxable? If so, why wasn't I taxed on it throughout 2015.
Second/third questions are, why has my tax code changed to 1T and what does 1T mean? This isn't my normal tax code : /

Any help would be must appreaciated. I have tried searching online for 1T tax codes but couldn't really find anything to explain it.

Thank you in advance

yes army pensions are taxable

as you have two sources of income you will have two taxcodes (one for each)

it might be that you were receiving two personal allowances by mistake

how much did you earn last tax year from your job and what was the taxcode (will be on your last payslip (march)
how much was your pension last year?

1T means you have a tax free allowance of £10 for your pension

chiny

It's too cold in my garage to unearth the HMRC paperwork but I have had many tax codes over the last few years, including 1T for a while. I came to the conclusion that effectively T meant temporary, and of course 1 means a very low non-taxable band. For me, this meant HMRC thought I should pay lots of tax whilst they reviewed my income. Like you, I had just started taking a pension whilst in full time employment and it does have tax implications.

During this 1T period (for my salary), HMRC issued a more usual looking tax code for my pension, presumably as they (reasonably) assumed my pension would go on longer than my job. If the £££ of your pension is less than the £££ of your allowances, you won't pay tax.

Maybe that will cast some light.

dunstonh

I have now just received this years letter and it has stated my tax code of: 1T and at the bottom it shows about 20% deductions from my monthly pension.

T means temporary. So, something has triggered a change to put you on a temporary code. Do you know what this is? For example, is there another income you are getting?
Has the state pension recently started?

unforeseen

I've just left my RAF pension code as BR as I have always earned enough in my job to use up my tax code. Keeps things simple

pg_tips

Thanks for all the responses...

Tax code for last years normal income was 1069, same for the pension code. Salary is below £20k a year, army pension is around £5.5K a year.

Looks like the T is temporary by the sounds of it.
These are my only 2 incomes, my state pension won't start for a few years yet.

Andy_L

The normal pension (AFPS) is taxable. A war pension (ie medical retirement for injury on duty) is both tax free and discounted as income for some means-tested benefits

greenglide

Suffix "T" is not "temporary" but it is used temporarily in lots of cases. It is used in circumstances where the numeric part of the code is not to be increased when a blanket increase in tax codes is done after budget changes. So 1000T is the same as 1000L but doesnt go up automatically.

1T is a strange one and would imply that only £10 of allowance is left from other income and you were not paying tax on any other income. Once tax is being paid on other pay which has the normal allowance against it the pension should be BR instead.

Will your total income (earned income plus pension) be enough to take you into higher rate tax?

Are they recovering an underpayment from you for the previous year? It sounds very much as if you do owe them money if you paid no tax on your pension and this was not taken into account of you tax code for employment.

dunstonh

pg_tips wrote: »

Thanks for all the responses...

Tax code for last years normal income was 1069, same for the pension code. Salary is below £20k a year, army pension is around £5.5K a year.

Looks like the T is temporary by the sounds of it.
These are my only 2 incomes, my state pension won't start for a few years yet.

Does the salary have the tax code applied to it?
You would then expect the pension to have the code BR. Although it may sit at a T code temporarily whilst it is being sorted. Technically, it could sit there at 0T as that is the same as BR.

CLAPTON

pg_tips wrote: »

Thanks for all the responses...

Tax code for last years normal income was 1069, same for the pension code. Salary is below £20k a year, army pension is around £5.5K a year.

Looks like the T is temporary by the sounds of it.
These are my only 2 incomes, my state pension won't start for a few years yet.

if you are saying that your job had a code of 1069 i.e. 10690 tax free and your pension had a code of 1069 i.e. a 10690 tax free allowance also then you have paid too little tax.
you were allowed only 10600 tax free normally in total and not per income. you probably owe them 20% of your pension income ..£1000

so this year your job should have a code of 1100L and your pension BR (i.e. 20% of all the pension)


it's likely that HMRC didn't realise you had two incomes

pg_tips

Thanks again for all your responses...
Income + pension will still only come in the lower tax bracket and yes, employment salary was assigned to the 1069 tax code.

What threw me is I paid no tax on the first years pension which is why I questioned if army pensions were taxable. I think Clapton is right, HMRC didn't realise there were two incomes - even though this was all declared on the pension application forms.

I haven't seen what my employment tax code is for this year, maybe this will change now?