Advice regarding pensions and self assessment tax please

Bazzeer

Hi all,

I've just retired and started receiving my state pension from October 2020 together with a previously existing civil service pension. I fully expected to hear from the HMRC with regard to paying income tax as the combined pensions will be in the region of £15,244/annum but I've received nothing.

Would somebody be kind enough to guide me as to what I should do next regarding self assessment tax?

Details of my pension income from April 2020 to April 2021 are Civil service pension £7686 and State pension £3062 totalling £10,748 so for this tax year (2020-2021) I assume I will not have to pay anything, is that correct?

Details of my pension income from April 2021 to April 2022 are Civil service pension £7686 and State pension £7558, a total of £15244 not including any rises in payment. So for the 2021-22 year I will have to pay tax on the £2744 I get over the £12500 allowance.

I am uncertain how I go about this. Do I have to get a tax self assessment account and should this be done now as I believe payments should be in advance or will HMRC contact me?

unholyangel

Your CSP should have notified you of a tax code change around the time you started receiving state pension. 

If you're not in self assessment the. For the 21/22 year, you should find your state pension will be a deduction in your code and you will pay the tax due from your CSP

Jeremy535897

For 2020/21, your two pensions will need aggregating with your earnings in 2020/21, as well as any other taxable income, to see if you owe any tax. The notice of coding on your civil service pension should address this. For 2021/22, if you have no other income to complicate matters, the notice of coding for your civil service pension should take into account the fact that £7,686 of your personal allowance is used by the state pension.

[Deleted User]

If it all works out you should receive a tax code for 2021/22 shortly. HMRC will be notified by the department dealing with state pensions of this source of income. Your code should be around 494L based on remaking personal allowances of 4942. (12500 - 7558). If you receive nothing by, say, mid-March, give HMRC a call. I am not sure what you mean by payments in advance. In any case you should not have to join the self-assessment club.

[Deleted User]

Jeremy535897 said:

For 2020/21, your two pensions will need aggregating with your earnings in 2020/21, as well as any other taxable income, to see if you owe any tax. The notice of coding on your civil service pension should address this. For 2021/22, if you have no other income to complicate matters, the notice of coding for your civil service pension should take into account the fact that £7,686 of your personal allowance is used by the state pension.

State pension 7558 as I am sure you meant to say.

Jeremy535897

[Deleted User] said:

Jeremy535897 said:

For 2020/21, your two pensions will need aggregating with your earnings in 2020/21, as well as any other taxable income, to see if you owe any tax. The notice of coding on your civil service pension should address this. For 2021/22, if you have no other income to complicate matters, the notice of coding for your civil service pension should take into account the fact that £7,686 of your personal allowance is used by the state pension.

State pension 7558 as I am sure you meant to say.

Yes, picked the wrong figure.

Bazzeer

Thank you all very much for your inputs.

So if I understand correctly I should not open a self assessment account and my tax will be aggregated by the Civil Service Pension who "should" hopefully contact me by March.

To complicate things further, the "Advice Of Payment" document I received from the Civil Service Pensions dated April 2020 had my Tax Code listed as 1011N. I've had the marriage allowance transferred to my wife for some time so I guess that's about right. If I log into my account on the Civil Service Pension website it has my tax code listed as 768N so that's got me completely confused!

Jeremy535897

768N means they are allocating allowances to your civil service pension equal to what it will be, so no tax will be deducted. N indicates you are passing £1,250 of your personal allowance to your wife. Your remaining allowance of £11,250 will cover your two pensions for 2020/21.

For 2021/22, as purdyoaten says, your code would need to be 494L to collect the tax due, plus you would also have to cancel the transfer of marriage allowance otherwise it will need to be 369N. There is no benefit in you transferring allowance to your wife as you will be able to use the full allowance yourself.