State Pension and Income Tax

codger

Sorry to be a nuisance, but I'm a bit baffled over the latest figures which the Inland Revenue has come up with in regard to my annual income tax assessment.

Today I've received a Revenue email asking me to check its latest tax code / tax forecast in my online PAYE account. I've done so. I cannot understand why the Revenue says it's taxed £200sworth of savings interest earned in financial year 2016-2017, still less why it says it proposes to do exactly the same again in the next financial year. I'm a Basic Rate taxpayer; I thought any savings interest up to £1,000 per annum was meant to be disregarded by the Revenue as taxable income???? The £200-and-odd is the total of the savings interest earned, yet it's as though the Revenue is treating it as (bizarrely) £200-and-odd over a non-existent £1,000 savings interest already earned. Iyiyiyiyiyi.

What I'm really baffled about though is my State pension. The Revenue quotes a figure for this year and for next which I don't recognise at all. It's much higher than the pension I actually get in my bank account. When I go to the Pensions Service web page, this gem of unambiguous information appears in large type:

"Any State Pension you receive is liable to income tax but it's paid to you gross without any tax deducted."

Eh??

I've found a Pensions Service number to ring and will do so on Monday, but thought I'd check here first to see if I've misunderstood what's happening and why the taxable (that is, gross) annual Pension income figure which the Revenue has come up with is entirely different to the total of the monthly State pension payments received which the Pension Service says is also the gross, and therefore taxable, amount.

They can't both be right, can they??

I think I'll file for bankruptcy. That ought to make life simpler.

Dazed_and_confused

I think you have misunderstood a few things.

All interest which was previously taxable i.e. non ISAs etc is still taxable however for a basic rate payer (including any interest) the first £1000 may be taxed at 0%. There is an added complication if you are one of the people who benefit from the entirely different savings rate band (currently up to £5000 taxed at 0%).

If the HMRC figures are out of date you just need to give them up to date estimates for this year and next (of ALL taxable interest not just anything over £1000).

State Pension is not and, to the best of my knowledge, never has been paid monthly. It is paid weekly or 4 weekly and this can made a fair difference to the figures - you have £7000 pension in your tax code and think I only get £538.50/month so that only comes to £6462 however you are actually getting £538.50 every 4 weeks which is £7000.

Neither do DWP/Pension Service deduct tax from it, if tax because of the State Pension you either pay it by paying more tax from your wages or other pension or if you don't have a job/other pension direct to HMRC

codger

Big thanks and lots of 'em, daze and confused. The early help is greatly appreciated -- and the clarification about State pension weekly payment scheduling, even more so: it explains why, when I check my bank statements, the DWP payment never seems to be on a fixed date of the month. I now realise, it's because the calendar month has nothing to do with it, only the four-weekly cycle. I'll get onto the Revenue today to fill in a form detailing actual savings -- ironically, it's an ISA account anyway. . . Thank you again. :T

AnotherJoe

codger wrote: »

I'll get onto the Revenue today to fill in a form detailing actual savings -- ironically, it's an ISA account anyway. . . Thank you again. :T

Then that's probably your mistake that caused this, did you tell them what you had in your ISA account? You don't make any entries at all for anything in an ISA. You'd only tell them about interest in non ISA accounts.