Paying tax on multiple pensions

tenchy

At the moment I have monthly payments from my SIPP and tax is paid as normal. Later this year I'll be receiving income from two more pensions. What's the normal means of paying tax when in receipt of multiple pensions?

Dazed_and_C0nfused

The new pension companies will probably use the emergency tax code for the first payment (meaning you will owe some tax to HMRC) but once they have told HMRC about the first payment then HMRC should send the pension companies a BR (basic rate) tax code for each new pension so you will pay 20% from then on.

Any tax owed will normally be collected by an adjustment to the tax code used for your current pension.

dunstonh

additionally, at some point, HMRC will likely switch your tax code to the highest source of income

tenchy

Okay, thanks. So there might be nothing for me to do. I thought it might be the case that one of the schemes - as you say, the highest income one (which is my current SIPP) - would take the tax liability.

squirrelpie

tenchy said:

Okay, thanks. So there might be nothing for me to do. I thought it might be the case that one of the schemes - as you say, the highest income one (which is my current SIPP) - would take the tax liability.

Each scheme pays the tax due on its own payments. The only question is which gets the benefit of any allowances (such as your personal allowance) and that is usually allocated to the largest as dunstonh said. If you didn't want that, you can ask HMRC to change the allocation to another source.

comeandgo

Going by my own experience I would suggest you tell HMRC about your new pension income.  Had two smallish pensions start and both of the companies used month1 tax codes and as both pensions under tax free amount no tax was deducted so did end up being due tax man a few thousand pounds.

Albermarle

Also do not forget about the State pension . If in receipt of this then your personal allowance ( whichever pension it is allocated to) will be reduced by that amount .