Tax on pension

Bruno58

Hi,can anyone help me.
I currently work part time and also have my pension.I pay income tax on my work wages and my pension.
In October my wages drop below the income tax threshold.
The question I need answering is will I still be paying full tax on my pension.
At the moment they take 20% tax on all of my pension.
Hope someone understands what I mean and can answer my question.

Spacie22

All you need to do is call HMRC and ask them to allocate part of your tax free allowance to your pension.

Dazed_and_confused

I doubt anything will change automatically during the current tax year.

Tax is based on your annual earnings so just because you are earning under the income tax threshold (I presume you mean £12,500) from October onwards it doesn't mean you will be for the tax year as a whole.

It might be that your employer refunds some of the tax already deducted between April and September when they pay you in October through to March.

How much do you think your P60 taxable pay amount will be for 2019:20 from your job?

Dazed_and_confused

All you need to do is call HMRC and ask them to allocate part of your tax free allowance to your pension.

But we don't know what the op will earn for the year as a whole so that may not be necessary.

Bruno58

Thank you for the quick reply.
Ball park figures Pension £14500 per annum before tax at present tax code on this BR so 20% on all of it.
Wages will be 10500 per annum in October Tax code i think is 1350.

Dazed_and_confused

What is current annual taxable pay with the job?

If it's say £20k then you will be earning roughly £10k from 6 April to October and say £5,250 from October to 5 April.

So £15k+ in total.

In which case there is no need for you to do anything. Unless your tax code is being used on a non-cumulative tax code your tax is recalculated each pay day and any excess will be refunded each time you are paid from October onwards.

The time to change things will be from 6 April 2020.

Bruno58

Hi at present wages are £15200 for the year then will drop to approx £10500 in October.
I am under the impression that from October I will not pay any tax on my wages.

nickcc

You'll still pay 20% tax on the total of your pension and your other income less your tax free allowance.

Dazed_and_confused

Your annualised wage will be c£12,850 so on the standard tax code you will be a taxpayer for the year as a whole.

Your employer will deduct tax as normal till October and then refund some each month when your earnings reduce.

badmemory

It is usually best to have the bulk of your tax allowance against your pension as that shouldn't either stop or reduce unlike other income may.

agent69

Bruno58 wrote: »

Hi,can anyone help me.
I currently work part time and also have my pension.I pay income tax on my work wages and my pension.
In October my wages drop below the income tax threshold.
The question I need answering is will I still be paying full tax on my pension.
At the moment they take 20% tax on all of my pension.
Hope someone understands what I mean and can answer my question.

I'm in a very similar situation having retired in March, but recently decided to do some ad hoc agency work. I spoke to the tax office about my revised circumstances earlier today.


I thought that taxation was dealt with in 'real time', so every time you are paid the system sorts out what your current tax liability is and deducts money accordingly. I'm using all my personel allowance on my SIPP withdrawls, so haven't paid any tax yet, but will do on the ad hoc earnings.



The lady at the tax office (who didn't know I was retired) was happy to update my details, so the SIPP will continue tax free and tax deducted for ad hoc earnings. You can also correct / update your income details if you have a personal tax account registered on line (https://www.gov.uk/personal-tax-account).


Either way, I don't think you have to wait until the end of the tax year to correct any over payment issues. Speak to the tax man (0300-2003300) and they will sort you out.