State Pension entitlement versus actual payments for tax

Horki

etienneg said:

It's only a difference of exactly when you receive the money.

Much appreciate your reassurance and explanation; thank you etienneg.

Horki

molerat said:

Seems a large difference there.  

It was just a few pounds last year which is why I have been so puzzled by the difference this year and am grateful for the help of this forum.

Dazed_and_C0nfused

If you still think it is wrong then supplying some figures might help

Horki

Dazed_and_C0nfused said:

If you still think it is wrong then supplying some figures might help

In fact adding the extra payment to my total means a shortfall of less than £10, very similar to la
st year, so I have stayed with that.  This is only the second return I have prepared so it's a steep learning curve.  Thank goodness for the generosity of forum members.

MilesBehind

I have an issue with the way State pension entitlement (vs actual) has created an underpayment on my tax account for 2024/25. I received £9037.60 within the tax year but have been assessed on £9511.60. This is in part due to receiving my pension for the first time in June 2024.  I based my own expected State pension income for 2024/25 on the letter received from DPA which stated:-  A one-off payment of £189.60 on June 14th followed by £884.60 every 4 weeks starting 12 July 2024. i.e. this equates to £9037.60

As I assumed £9037.60 to be correct, I drew down £10k from an annuity which meant my total gross income would be £50k for the tax year and therefore under both the higher rate threshold and the same threshold for the transfer of my wife's unused tax allowance. As the entitlement methodology results in the higher pension amount, I received a tax bill stating I have underpaid £282.60 primarily due to losing the transfer of my wife's tax allowance. 

I think this is unfair as I never received any communication from either DWP or HRMC stating State pension entitlement was the basis for assessment. All I had was the DWP letter. Had I known about this spurious methodology, I would have drawn down a lower amount of course.  My feeling is that this is likely a one-off scenario due to the first year of pension and more importantly that the underpayment ought to be waived under the circumstances. My conversation with the tax people have so far yielded nothing so I have asked for the matter to be escalated via a formal complaint.

Is there anything else I could do or someone else I could contact for help ?

Thanks

Grumpy_chap

QrizB said:

By way of comparison, a landlord pays tax on the rent due, not on the rent received. A business pays tax on the amount invoiced, not on the amount paid.

Do they?

In the case of the LL, tax is paid on income received less allowable expenses.  

In the case of the business, VAT is levied on amount invoiced (not paid) and corporation taxes are also usually calculated on the basis of invoiced amounts.  However, businesses can also raise credit notes to write off unpaid overdue sums (and hence correct the VAT and corporation taxes due).
Small business may operate on cash accounting, so only on monies received.

Dazed_and_C0nfused

MilesBehind said:

I have an issue with the way State pension entitlement (vs actual) has created an underpayment on my tax account for 2024/25. I received £9037.60 within the tax year but have been assessed on £9511.60. This is in part due to receiving my pension for the first time in June 2024.  I based my own expected State pension income for 2024/25 on the letter received from DPA which stated:-  A one-off payment of £189.60 on June 14th followed by £884.60 every 4 weeks starting 12 July 2024. i.e. this equates to £9037.60

As I assumed £9037.60 to be correct, I drew down £10k from an annuity which meant my total gross income would be £50k for the tax year and therefore under both the higher rate threshold and the same threshold for the transfer of my wife's unused tax allowance. As the entitlement methodology results in the higher pension amount, I received a tax bill stating I have underpaid £282.60 primarily due to losing the transfer of my wife's tax allowance. 

I think this is unfair as I never received any communication from either DWP or HRMC stating State pension entitlement was the basis for assessment. All I had was the DWP letter. Had I known about this spurious methodology, I would have drawn down a lower amount of course.  My feeling is that this is likely a one-off scenario due to the first year of pension and more importantly that the underpayment ought to be waived under the circumstances. My conversation with the tax people have so far yielded nothing so I have asked for the matter to be escalated via a formal complaint.

Is there anything else I could do or someone else I could contact for help ?

Thanks

You are really just wasting everyone's time (including your own).  

If you feel that strongly you need to take it up with MP to get the law changed.  Although that won't actually help you now.

What happened when you contacted HMRC to tell them the amount of State Pension in your 2025-26 tax code was too low as it didn't include the amount you had been paid for 2024-25 which fell in the 2025-26 tax year?

QrizB

Grumpy_chap said:

QrizB said:

By way of comparison, a landlord pays tax on the rent due, not on the rent received. A business pays tax on the amount invoiced, not on the amount paid.

Do they?

In the case of the LL, tax is paid on income received less allowable expenses.

It depends on whether they're using cash basis or accruals.

https://www.jondaviesaccountants.co.uk/can-i-claim-tax-relief-on-unpaid-rent/

Also, note this is a four year old thread that's been bumped.

Marcon

MilesBehind said:

I have an issue with the way State pension entitlement (vs actual) has created an underpayment on my tax account for 2024/25. I received £9037.60 within the tax year but have been assessed on £9511.60. This is in part due to receiving my pension for the first time in June 2024.  I based my own expected State pension income for 2024/25 on the letter received from DPA which stated:-  A one-off payment of £189.60 on June 14th followed by £884.60 every 4 weeks starting 12 July 2024. i.e. this equates to £9037.60

As I assumed £9037.60 to be correct, I drew down £10k from an annuity which meant my total gross income would be £50k for the tax year and therefore under both the higher rate threshold and the same threshold for the transfer of my wife's unused tax allowance. As the entitlement methodology results in the higher pension amount, I received a tax bill stating I have underpaid £282.60 primarily due to losing the transfer of my wife's tax allowance. 

I think this is unfair as I never received any communication from either DWP or HRMC stating State pension entitlement was the basis for assessment. All I had was the DWP letter. Had I known about this spurious methodology, I would have drawn down a lower amount of course.  My feeling is that this is likely a one-off scenario due to the first year of pension and more importantly that the underpayment ought to be waived under the circumstances. My conversation with the tax people have so far yielded nothing so I have asked for the matter to be escalated via a formal complaint.

Is there anything else I could do or someone else I could contact for help ?

Thanks

If you were fine tuning to that extent, it would have made sense to check the facts rather than just 'assume' - but we can all be wise after the event.

Have a look at the second post in this thread https://forums.moneysavingexpert.com/discussion/6610482/civil-service-pension-tax/p1 and https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim11801 and see if there's anything there you can use to support your argument that you should be taxed on the 'non-statutory basis'.

MilesBehind

Dazed_and_C0nfused said:

MilesBehind said:

I have an issue with the way State pension entitlement (vs actual) has created an underpayment on my tax account for 2024/25. I received £9037.60 within the tax year but have been assessed on £9511.60. This is in part due to receiving my pension for the first time in June 2024.  I based my own expected State pension income for 2024/25 on the letter received from DPA which stated:-  A one-off payment of £189.60 on June 14th followed by £884.60 every 4 weeks starting 12 July 2024. i.e. this equates to £9037.60

As I assumed £9037.60 to be correct, I drew down £10k from an annuity which meant my total gross income would be £50k for the tax year and therefore under both the higher rate threshold and the same threshold for the transfer of my wife's unused tax allowance. As the entitlement methodology results in the higher pension amount, I received a tax bill stating I have underpaid £282.60 primarily due to losing the transfer of my wife's tax allowance. 

I think this is unfair as I never received any communication from either DWP or HRMC stating State pension entitlement was the basis for assessment. All I had was the DWP letter. Had I known about this spurious methodology, I would have drawn down a lower amount of course.  My feeling is that this is likely a one-off scenario due to the first year of pension and more importantly that the underpayment ought to be waived under the circumstances. My conversation with the tax people have so far yielded nothing so I have asked for the matter to be escalated via a formal complaint.

Is there anything else I could do or someone else I could contact for help ?

Thanks

You are really just wasting everyone's time (including your own).  

If you feel that strongly you need to take it up with MP to get the law changed.  Although that won't actually help you now.

What happened when you contacted HMRC to tell them the amount of State Pension in your 2025-26 tax code was too low as it didn't include the amount you had been paid for 2024-25 which fell in the 2025-26 tax year?

Thanks (I think). You are correct in that 2025/26 may be lower than the 'actual', BUT it won't recover the lost tax allowance will it ? That was my main point. If that hadn't been affected then the underpayment would be far less significant.