2 x Pensions with Different Providers - Tax

clonkel

I have two pensions with different providers. One is under 12,500 whilst the other is over. Over the last year I have taken the lower pension but will soon be taking the higher one also. So far the lower one has not been taxable. When I take the higher one (with a different provider) what happens regarding how the tax free allowance is allocated?

Will I just have to wait each year and claim the tax back after Apr 05 and will I have to complete a tax return?

Thank you very much

AlanP_2

I'm not drawing any pension income so this might be incorrect but I would think that the current pension in payment will have had a tax code allocated to it as the provider has no idea whether you should pay income tax or not, or at what rate, until HMRC tell them via a tax code. If this isn't on your "payslip" ask them, or look at your HMRC personal tax account online.

When you start the next pension the first payment is likely to be on emergency tax, as they will have no tax code to use. Once it starts and HMRC are notified the appropriate code will be allocated to it that accounts for both income sources.

BTW - These codes will change once you draw State Pension as that is paid gross and the tax due collected from your other pensions / income sources.

comeandgo

I had your situation last month and was surprised at how quickly HMRC had it under control.  My original private pension payment did have the correct tax code to allow it all to be paid tax free as it was less than personal allowance.  The first payment of the second private pension had emergency code applied but later that week I received letter from HMRC detailing how my tax allowance was to be divided and everything correct when second payment came through.

xylophone

You will be a basic rate tax payer once your two pensions are in payment?
In the new tax year, it would make sense to have your full personal allowance allocated to the higher pension with the other coded BR?

clonkel

Thank you very much for the replies.

@xylophone Does this mean I can inform the provider of the higher pension to use the 12,500 and inform the lower provider to take tax or do I have to do this via HMRC?

@AlanP_2 The provider of the higher pension made an incorrect payment when the annuity was set up. They reversed this but it meant they were given a 1250L tax code.

@comeandgo thanks I hope my goes as smoothly. Does that mean you do not have to complete a tax return?

thanks again

saver_ali

If you take regular payments then HMRC do seem to sort it our fairly quickly. Taking occasional lump sums is a bit trickier, as they might take emergency tax, and sometimes think you are taking that amount as a regular monthly payment. They did that with me, and incorrectly assumed I would be a higher rate tax payer, so I ended up with a ridiculous tax code.

My husband retired last year, and they haven’t asked him to complete a 2019-20 tax return for the first time in many years. It would be easier if they did, because they have automatically carried forward things like charity donations, and job expenses from previous years, which are no longer applicable. We are going to have to contact HMRC to get these removed, and pay some extra tax that he owes,

comeandgo

clonkel said:

Thank you very much for the replies.

@xylophone Does this mean I can inform the provider of the higher pension to use the 12,500 and inform the lower provider to take tax or do I have to do this via HMRC?

@AlanP_2 The provider of the higher pension made an incorrect payment when the annuity was set up. They reversed this but it meant they were given a 1250L tax code.

@comeandgo thanks I hope my goes as smoothly. Does that mean you do not have to complete a tax return?

thanks again

For myself, I'm happy with my codes and have no need to request tax return.  If HMRC ask me to complete one then I will. A few years ago  my husband had a few different private pension providers and then state pension and it took a few years before everything settled with correct codes.  He had to complete tax returns but for my case, I lot easier.

squirrelpie

" Does this mean I can inform the provider of the higher pension to use the 12,500 and inform the lower provider to take tax or do I have to do this via HMRC?"

You do it via HMRC and they tell the pension providers.

clonkel

Thank you for all of the replies