Tax Code Question

caveman38

unholyangel said:

caveman38 said:

Dazed_and_C0nfused said:

If you say what taxable income you expect your wife to take from the SIPP this tax year it should be possible to calculate the tax code now.

Thanks. I wasn't aware that you can provide a figure of SIPP income on your personal tax account. Should you do it before the revised tax code is sent in the summer or now?

Is the sipp currently showing on your online account? Did you see my previous post querying how it will be withdrawn? 

If they are a current live source, you can update the estimated pay and it should result in the correct code being issued (not necessarily the right amount of tax being deducted though). If they are not a current live source then it's a bit more complicated. 

Also you query summer, why summer? Is it a lump sum drawdown that will be taken in summer? 

I will see if I can se a current live source as you suggest on Tuesday. I say summer because although she has a code which allows her all her (small) SIPP to be paid free of tax. When last years BBS interest arrive at HMRC it will alter her coding  for 21/22 and unless they made are aware (DC suggestion) of the SIPP annual figure will issue a code that will require her to pay tax on her SIPP. The SIPP is £200 per month.

caveman38

OK, I have had a thorough look at her tax statement and I have been leading you all up the garden path.
HMRC have been made aware of her £200 per month SIPP and issued provider with coding of 240 and she received her Aprils payment free of tax.
Her statement shows £1149 interest from BBS and is shown in the "starting rate for savings" and again free of tax and I assume when new figures are furnished will still be free of tax.
It is not how I expected it to be but HMRC juggle the figures and allow her to have all her income inc. interest, free of tax.
Thanks for all the help. I think I understand it now.

Dazed_and_C0nfused

If you changed her estimated pension to £2000 her tax code would be reduced to 200(L or N) as more allowances would be available to set against the interest.

If you increased it to £2600 her code would increase to 260(L or N) as there are less allowances available to be set against the interest.

If her pension income used up all her Personal Allowance then there would be no deduction for interest unless her interest was greater than her available savings starter rate and savings nil rate band (aka Personal Savings Allowance).