One of my annuities paying 40% tax

bullinn1

Hi chaps, I have several annuities and now I have reached pension age I'm having to pay tax. In total I get, from several companies about £800 a month gross and then my state pension. I have been informed by HMRC that one of the annuities will be a D0 tax code ... ie 40%, this has been confirmed by the pension provider, they have taken 40% off my monthly annuity. My total income is less is about £20k per year shouldn't all above the tax free allowance be taxed at 20% ?

Many thanks to anyone that can help.

Confused ... Roger

Linton

Tax for multiple incomes gets a bit messy. Each of your annuities will be assigned a separate tax code with the aim of making the total tax take correct. It cant be a simple 20% with full allowance because state pension is paid gross and any tax due on it must be taken off some other income. So what tax do you pay on your other 3 annuities? Is the total tax correct?

If it isnt, or if you would like some other allocation of tax codes just talk to HMRC. They are perfectly happy to adjust tax codes in any way you want.

xylophone

Lets suppose that your total taxable income consists of your state pension and your private pensions.

The single person's allowance is £11,000 so that tax at 20% is owed on £9000 - you need to pay £1800 per annum or £150 a month.

Your state pension is paid gross but is taxable so that your tax due will be taken from your private pensions.

Add up the tax that will be taken in total from your private pensions- does it agree with the amount you are due to pay?

Do you have any income by way of interest on your savings or any dividend income?

https://www.gov.uk/government/publications/personal-savings-allowance-factsheet/personal-savings-allowance

https://www.hl.co.uk/shares/dividends-tax-calculator

bullinn1

I think I understand ... HMRC works out how much tax I should be paying on my several pensions/annuities and takes that amount but, possibly, from only one of the providers .... ?

bullinn1

BTW I have no savings shares etc just pensions annuities amounting to a total of circa £20,000 per annum.

jem16

rogertb wrote: »

I think I understand ... HMRC works out how much tax I should be paying on my several pensions/annuities and takes that amount but, possibly, from only one of the providers .... ?

HMRC will provide a tax code for each pension/annuity apart from the state pension which is always paid gross but is taxable.

So for example if you had 3 annuities from 3 different pension providers, then you would have 3 tax codes. The main tax code would have your personal tax free allowance and a deduction made for the state pension. The other two tax codes would be BR for Basic Rate and D0 for 40% rate depending on your total income. Sometimes the main tax code can be split over two or more pensions if that is better.

So could you tell us what tax codes you have on each pension source? I wouldn't expect any of them to need a D0 code if your total income is £20k.

bullinn1

I have 5 annuities from 4 providers 2 from the Pru 1 from Scot Eq and 2 others Aegon and Just ... only the Pru and S/E were mentioned in this document and only the Pru have written to me, so far, telling me about the changes to my payments:

xylophone

Do you have details of the gross amount expected from each annuity in the tax year 2016 - 17?

bullinn1

Pru £83 Pru £274 Just £125 Scot Eq £320 ... thanks so much for helping me out here.

jem16

rogertb wrote: »

Pru £83 Pru £274 Just £125 Scot Eq £320 ... thanks so much for helping me out here.

Is that monthly or yearly?

What about Aegon?

jem16

rogertb wrote: »

What does Note 3 say about the adjustment to Rate Bands? That tends to only happen when they think some of your income should be at 40% so something isn't right. Do you have any other income other than pensions?