Help me understand my tax codes please.

xxdeebeexx

Hi I am receiving 2 small teachers pensions and a HL Sipp (the £2880 cash sipp).
The total income from these pensions is well under £12500 pa

I have 3 tax codes and they aren't evenly spread.
The code for my smaller TP is correct

The code for my main TP allows an extra £1116 pa with a nearby comment £1116 untaxed interest on investments and savings

and
the HL Tax code will start deducting tax after 7 months

on another page there's the following statement :-
You can earn £3,272 more before your income reaches the next tax band.
I've spoken to the tax office twice but I simply don't understand why my tax codes can't be evened out so that I don't have any tax deducted from Hargreaves Lansdown sipp.

Could someone please help me understand whats going on.

tia

xxdeebeexx

Dazed_and_confused

It is easier for people to help you of you give us some proper detail

What is each tax code and how much taxable pension income do you expect to receive for each pension in the current tax year?

The detailed breakdown for your main pension (the one with the Personal Allowance included in the tax code) is useful as well.

Tax codes are calculated according to how much income HMRC expect you to receive so if that element is wrong the tax code can be wrong.

xxdeebeexx

Thanks. I wasn't sure how much private information to divulge but I guess no one on here knows me so it doesn't matter much.

Main TP pension
£7157 - 817L

smaller TP pension
£1527 - 152T

Hargreaves Lansdown Sipp
£2700 - 168T

After a few months I will be paying tax on the HLsipp but I don't want to. I know I can claim it back but I would rather some of the tax code from main pension be moved to HL
I don't understand what the Personal Allowance is that's included in the tax code of the main pension.


tia


xxdeebeexx

Dazed_and_confused

I don't understand what the Personal Allowance is that's included in the tax code of the main pension.

Did you mean to type that?

Have you looked at your tax codes on your Personal Tax Account on gov.uk?

If so what did it show the estimated income to be at each pension?

Why do you think you will be paying tax in a few months with HL? I presume this means you aren't paying any yet? Are you taking money out unevenly?

xxdeebeexx

Dazed_and_confused wrote: »

Did you mean to type that?

Have you looked at your tax codes on your Personal Tax Account on gov.uk?

If so what did it show the estimated income to be at each pension?

Why do you think you will be paying tax in a few months with HL? I presume this means you aren't paying any yet? Are you taking money out unevenly?

Yes, I've had a look at the tax codes on gov.uk and this is where I got the tax codes from.
The estimates for each pension are as above .
I can't increase or decrease the Teachers pension income - I get the same regular income each month.


For some reason I was expecting to see something like...
Main TP pension
£7157 - 715L (817L on gov.uk)

smaller TP pension
£1527 - 152T (152T on gov.uk)

Hargreaves Lansdown Sipp
£2700 - 270T (168T on gov.uk)

Because my tax code for HL is 168T I thought that once I had withdrawn £1680 from the sipp I would start paying tax on the rest.
Earlier this year I was paying tax on my main TP so I asked to have the Tax codes changed and then I got confused.


xxdeebeexx

Dazed_and_confused

I don't understand what the Personal Allowance is that's included in the tax code of the main pension.

Did you mean to type that?

Yes

Your Personal Allowance is usually included in your tax code of the main pension. That is perfectly normal and nothing to be concerned about.

The estimates for each pension are as above .

Are these your estimates or figures you can see on your Personal Tax Account?

For some reason I was expecting to see something like...
Main TP pension
£7157 - 715L

smaller TP pension
£1527 - 152T

Hargreaves Lansdown Sipp
£2700 - 270T

The tax code of 270T would only be allocated to HL of HMRC knew you were going to get £2700 (or more) from HL in the 2019:20 tax year.

Because my tax code for HL is 168T I thought that once I had withdrawn £1680 from the sipp I would start paying tax on the rest.

That's not how tax codes work. The 1689 (the missing digit is always a 9 when the pension company or employer works things out) is split equally across the year so at the moment you should be paying tax on the HL pension if it averaging £141 or more per month.

You just need to tell HMRC that you expect your pension with HL to be £2,700 in the current tax year and ask them to recalculate your tax codes based on that figure being used. At the same time it would be sensible to tell them your figures for the other two pensions.

xxdeebeexx

Dazed_and_confused wrote: »

Your Personal Allowance is usually included in your tax code of the main pension. That is perfectly normal and nothing to be concerned about.

Are these your estimates or figures you can see on your Personal Tax Account?These are the figures on my personal tax account


The tax code of 270T would only be allocated to HL of HMRC knew you were going to get £2700 (or more) from HL in the 2019:20 tax year.

That's not how tax codes work. The 1689 (the missing digit is always a 9 when the pension company or employer works things out) is split equally across the year so at the moment you should be paying tax on the HL pension if it averaging £141 or more per month.Yep, you've found the problem. I haven't informed HL that I want to increase the monthly withdrawal from my sipp. I've still got £140 going into my bank account when I was planning to withdraw £225 per month


You just need to tell HMRC that you expect your pension with HL to be £2,700 in the current tax year and ask them to recalculate your tax codes based on that figure being used. At the same time it would be sensible to tell them your figures for the other two pensions.
I changed the amount on my personal tax account to £2,700 and was then expecting the code to change to 270T but the tax code stayed the same but the income amount on my page has increased to £2700.
Thanks, I have phoned HMRC twice to give them the figures.
I also ask for some help to understand the allocated tax codes but they were clearly very busy and didn't have much time to give me

Thank you so much for taking the time to help me.


xxdeebeexx

Dazed_and_confused

Are you planning on withdrawing £2,700 or £225/month?

If you've only taken £140/month in April, May and June and change it to £225/month that's only £2,445 not £2,700.

xxdeebeexx

Dazed_and_confused wrote: »

Are you planning on withdrawing £2,700 or £225/month?

If you've only taken £140/month in April, May and June and change it to £225/month that's only £2,445 not £2,700.

I was planning to withdraw £225 monthly not £2,700 in a lump sum. So now I will have to adjust the amount I withdraw from July onward to £250 . That should get me close to the £2700 I was looking for.


Thank you so much for your time Dazed and confused.

I think I can see what's going on now....the 'unused' part of my personal allowance is kept with my main source of income - to keep it somewhere.

In the past I've always been a supply teacher and the 'unused' part of my personal allowance was 'with' the local authority to be used as and when.

A week or so ago I informed HMRC that I won't be doing any more supply teaching and that part of my personal allowance then popped in with my main pension and increased the tax code to 817L for £7157 .

Up until then I have always seen an even spread - tax codes that relate directly to the income eg £7157 - 715L
Along with my HL mistake I was completely confused

thanks again

xxdeebeexx

badmemory

Shouldn't the total code for this year be 1250 (personal allowance 12500) whereas I only get a total of 1137 anyway. So reduce one to 717 & have the rest put on your sipp. I was under the impression that you can now make these changes yourself through your online tax account.

Dazed_and_confused

Due to the relatively low level of expected pension income there is some spare Personal Allowance so this has been used by the op's interest (see first post).

If the pension income was larger and there was no spare Personal Allowance then the interest would be liable at the savings starter rate and no adjustment to the tax code allowances would be made.