Tax change on retirement

Kd8heb

I retired in September this year from a role that put me in the 40% tax band. I was also receiving a couple of pensions that kicked in at age 60 and so was also paying tax on them at 40%.
Should the tax on my pensions have dropped to 20% as my income has dropped to below the 40% threshold now or do I have to wait until the new tax year.

xylophone

Do you have on-line access to your Personal Tax Account?

https://www.gov.uk/personal-tax-account

Are you yet in receipt of your state pension?

You can contact HMRC by telephone to discuss your situation.

https://www.gov.uk/government/organisations/hm-revenue-customs/contact/income-tax-enquiries-for-individuals-pensioners-and-employees

Kd8heb

No, I do not reach my state pension age for another 4 years.

xylophone

No, I do not reach my state pension age for another 4 years.

Have you obtained a new state pension statement to establish your "starting amount"?

https://www.gov.uk/check-state-pension

Given your DB pensions, it is quite likely that your SA will be below the value of the full NSP and that you could benefit by making additional voluntary contributions.

http://www.thisismoney.co.uk/money/pensions/article-3535618/STEVE-WEBB-Buying-ups-paying-missing-NI-boost-state-pension.html

http://www.royallondon.com/Global/documents/GoodWithYourMoney/TOPPING-UP-YOUR-STATE-PENSION-GUIDE.pdf

It is also possible that by making contributions to a personal pension in this tax year, you could reduce your tax liability - might be worth considering.

p00hsticks

Kd8heb wrote: »

Should the tax on my pensions have dropped to 20% as my income has dropped to below the 40% threshold now or do I have to wait until the new tax year.

You need to check that the tax codes used by your pension providers fully take account of and use your personal allowance - if so then you should automatically be paying the right amount of tax. If not, you need to contact HMRC to get them adjusted.

Kd8heb

As I understand it my personal allowance was being used by my employer. Will they have used it all or just a prportion of it as I retired about half way through the tax year.

I received a tax bill a while ago for the previous tax year for underpayment of tax as one of the pension schemes had applied my personal allowance in error. I paid that back at the time so that is not in the equation.

Suffolk_lass

Kd8heb wrote: »

As I understand it my personal allowance was being used by my employer. Will they have used it all or just a prportion of it as I retired about half way through the tax year.

I received a tax bill a while ago for the previous tax year for underpayment of tax as one of the pension schemes had applied my personal allowance in error. I paid that back at the time so that is not in the equation.

Normally your employer would have smoothed your personal tax allowance across 12 months, suggesting that if your last pay packet related to September, it would have used approximately half. I would register for your Personal Tax Account online - it will do all the calculations for you. Your two pensions that are paying already do make it a tad more complicated, hence register for the tool and then call HMRC up - if you are already registered you can get it corrected straight away - and you may not need a refund if they can resolve it with you in-year. So much easier than it used to be!

I agree that you should also do a state pension forecast on gov.uk too.

SL