K tax code

Morangie

My mum lives in Spain and is 80 years old. Sadly my father passed away in April also aged 80. She was advised that she would receive some of my fathers pension from the Prudential. An amount of £137.70. She has received a letter saying HMRC has changed her tax code to K370 and that now she will be £68.85 in tax and receive £68.85. She is not in employment so how can she have to pay 50% tax on such a small pension amount?? 

xylophone

Your mother is tax resident in Spain? Is HMRC aware of this?
What has happened in respect of the state pension now that your father has died?
https://www.gov.uk/tax-on-pension/tax-when-you-live-abroad#:~:text=on%20unauthorised%20payments-,Tax%20when%20you%20live%20abroad,UK%20tax%20on%20your%20pension.

squirrelpie

Morangie said:

My mum lives in Spain and is 80 years old. Sadly my father passed away in April also aged 80. She was advised that she would receive some of my fathers pension from the Prudential. An amount of £137.70. She has received a letter saying HMRC has changed her tax code to K370 and that now she will be £68.85 in tax and receive £68.85. She is not in employment so how can she have to pay 50% tax on such a small pension amount?? 

According to https://www.gov.uk/employee-tax-codes/letters (found by a search for tax code K):

"Tax codes with the letter ‘K’

The letter K is used in an employee’s tax code when deductions due for company benefits, state pension or tax owed from previous years are greater than their Personal Allowance.

Multiply the number in their tax code by 10 to show how much should be added to their taxable income before deductions are calculated.

Example An employee with tax code K475 and a salary of £27,000 has taxable income of £31,750 (£27,000 plus £4,750).

The tax deduction for each pay period can’t be more than half an employee’s pre-tax pay or pension."

Morangie

Thanks Xlophone I’ll speak with my mum and try to get some answers. I think my dads state pension has stopped, I’m not sure in their tax situation as to whether it’s paid the uk or Spain. My mum hasn’t worked for 40 years so I’m confused how this seems to be wrapped up in an employee coding? 

xylophone

I think my dads state pension has stopped, 

As would be expected - what has happened about your mother's state pension?

See p21 here

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/181235/derived-inherited-entitlement.pdf

My mum hasn’t worked for 40 years so I’m confused how this seems to be wrapped up in an employee coding? 

In your mother's case, for employee read "pensioner".

You do need do establish her tax residency.

JezR

Also note that as the K code has been calculated at the maximum of 50% of the Prudential pension, there is most likely to be a further tax liability depending on the actual total income (if considered UK tax resident) as it is highly unlikely to match this figure exactly.