Tax on pension

JBO

Hello, my husband passed away in 2012 and his small private pension which comes to me is being taxed at source by the pension provider, however is being taxed again through paye tax code. I tried to ask the pension provider about it and they advised they always take of tax before they pay it. Is this correct to pay two lots of tax? thankyou

Dazed_and_confused

Probably not.

Do you mean the small private pension company deduct tax (20%?) and your tax code (for another source of income) has a deduction included in it for the small private pension?

A bit more detail would help understand if you need to contact HMRC about this. It won't be the small private pension company who correct this. They may have to change the tax but only on instruction from HMRC.

Linton

JBO wrote: »

Hello, my husband passed away in 2012 and his small private pension which comes to me is being taxed at source by the pension provider, however is being taxed again through paye tax code. I tried to ask the pension provider about it and they advised they always take of tax before they pay it. Is this correct to pay two lots of tax? thankyou

Pension payments beyond the 25% tax free are always taxed at source under PAYE using a tax code provided by HMRC. It operates in exactly the same way as taxes on wages. In allocating tax codes between multiple incomes HMRC will ensure that the tax allowance for each income totals to your standard annual allowance. So the effect is that the total tax taken is the same as it would be if your total income was paid by one "employer".



If you wish you can ask HMRC to move the tax take from one income to another.

xylophone

Do you have other taxable income as well as your widow's pension?

What is the tax code shown on your payment advice from the pension company?

Dazed_and_confused

I don't think the tax code on the small private/widow's pension will tell the whole story.

I see this differently to Linton but much more detail is required to know which of us is along the right lines.

Linton

I guess it could be confusion with tax treatment of state pension. More info on total income and total tax would clarify things.

Dazed_and_confused

Or the small private pension genuinely is being "taxed" twice.

Once by the small private pension company deducting tax and secondly by an adjustment to the op's main tax code which means they are paying additional tax on their main pension (which cannot be the State Pension as far as HMRC and tax codes are concerned).

But as you say we need more info from the op to know for certain.

Marcon

OP - do you have a personal tax account with HMRC? If not, it's quick and easy to set one up: https://www.gov.uk/personal-tax-account

That might help you to understand what's going on without having to try and explain it all here.

JBO

I was trying to upload a picture but it won’t do it.
I pay £15 tax on £75.21 taxed at source by pension provider.

Then on my Hmrc tax summary (I can only find 2016/17):

Your taxable income
Total income from employment. £21950.76
Personal pension income. £902.52
Other income. £991.00
Benefits from employment. £50.00

Your income before tax. £23894.28
Less your 2016-17 tax free amount £11000.00
You pay tax on. £12894.28

Your tax was calculated as
Income tax
Basic income tax £11903.00 at 20%. £2380.60
Total income tax £2378.60
National insurance nics £1849.54
Total income tax and nics. £4228.14
Your income after income tax and nics. £19667.14

Does this seem right ? When I’ve spoken to hmrc they say I should get taxed on the pension as it’s income
Thankyou

JBO

Tax code on pension says BR

Dazed_and_confused

Hmrc tax summary

If this is referring to your annual tax summary then you can ignore that for the purposes of knowing if you are being taxed twice.

That calculation means absolutely nothing and is merely a precursor to the pie chart showing how your tax and NI has been spent by the government.

What you need now is the tax code for your main source of income.

Or a P800 tax calculation.