Military pension and income tax double tax?

2 Posts
Looking for a bit of advise after a lightbulb moment a few weeks ago. Am I being overtaxed?
I get a military pension of less than 10k a year and it is taxed at 20% BR. I also have a job where with a lot of overtime brings me a decent wage taxed as normal through the tax code. Deductions for the company van private use and the 40% band rate adjustment reduce my tax code as expected.
The tax code is decided on the total income as you know, wages, overtime, van benefit and pension. They use the full pension amount even though I have paid 20% on that already, that's £1650 a year tax paid but then pay tax on the full amount again...am I being taxed twice or is there a loophole?
I get a military pension of less than 10k a year and it is taxed at 20% BR. I also have a job where with a lot of overtime brings me a decent wage taxed as normal through the tax code. Deductions for the company van private use and the 40% band rate adjustment reduce my tax code as expected.
The tax code is decided on the total income as you know, wages, overtime, van benefit and pension. They use the full pension amount even though I have paid 20% on that already, that's £1650 a year tax paid but then pay tax on the full amount again...am I being taxed twice or is there a loophole?
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- I'm obviously paying tax sooner ( as in less earnings ) on my employment wages.
You pay the same either way but it feels nicer on pension day to get the full amount !!!
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Your income(s), when listed on your tax coding, will always be pre-tax as HMRC will look at your total income/taxable benefits when calculating your tax code. If you think your tax code is wrong, then it may be best to speak to them for an explanation.
the coding notice is HMRC's view of your total PRE TAX income from all the sources they know about
if that total exceeds the basic rate tax band, then the code will be adjusted to collect the extra 20% tax due because you are now a higher rate taxpayer (40%) on the amount OVER the basic rate band
in simple terms:
you get 11,850 tax free
you pay 20% tax on the next £34,500
and finally you pay 40% on anything in excess of 46,350
clearly therefore your pension + salary + overtime + benefit in kind is more than 46,350 so your code needs to be adjusted to collect the extra tax.
This is actually bad advice. Your pension income is forever - well for the many years you are going to live, your employment income is only for as long as you are in that employment. The code on your pension would be best at just under what your actual pension is, this protects you against underpaying tax in a normal year.
This would protect you against a 20% shortfall in pension income for a few months if your job for some reason fell through & that seems to be happening to a lot of people at the moment.
If you didnt have a pension and your job payed over £34,500 then normally your first £11,850 would be tax free and then you'd be taxed at 20%
If your new job pays over £46,350 then the first £11,850 would be tax free, the next £34,500 taxed at 20% and then any over the £46,350 will be taxed at 40%.
So throw your wage and pension together so lets say your pension is £10,000 and your pay totals £46,000 then income would be £56,000 (First £11,850 tax free, next £334,500 at 20% and the rest at 40%)
So regardless of if its the pension or the first £11, 850 of your wage, it will be tax free.
Current debt ZERO.