State Pension entitlement versus actual payments for tax

Dazed_and_C0nfused

MilesBehind said:

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. 

On the calculation you received (P800 or PA302?) how much of your income was taxed at 40%?

And did you have £1 or more dividend income in 2024-25 (ignoring tax exempt dividends from ISA's and within pensions).

Qyburn

Dazed_and_C0nfused said:

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?

Subsequent years will all be correct. The initial over taxation won't be corrected until, possibly, the year you die. Yet another argument for weekly payment as that reduces, but doesn't completely remove, that first year over taxation.

Dazed_and_C0nfused

Qyburn said:

Dazed_and_C0nfused said:

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?

Subsequent years will all be correct. The initial over taxation won't be corrected until, possibly, the year you die. Yet another argument for weekly payment as that reduces, but doesn't completely remove, that first year over taxation.

But there is no "over taxation".

My point was that if the op thought the amounts actually paid in each tax year were what counted then the amount in the tax code for the second year would be too low as it doesn't include the amounts that relate to the first year.

But the op only seems to be concerned about the amount in the first year and, if their rules were to apply, is happy to gloss over not paying enough tax in year two.

Qyburn

Dazed_and_C0nfused said:

My point was that if the op thought the amounts actually paid in each tax year were what counted then the amount in the tax code for the second year would be too low as it doesn't include the amounts that relate to the first year.

But the op only seems to be concerned about the amount in the first year and, if their rules were to apply, is happy to gloss over not paying enough tax in year two.

I don't know where you're getting the "not enough tax in year two" from. In year two tax will be levied on a whole 12 months' entitlement, some of which won't be received until year 3. In year three he'll be taxed on a whole 12 months' entitlement, some of which won't be received until year 4.  Etc.

As for over taxation, in my case I claim it weekly. In the first year I received one part week, and 25 full weeks. I was taxed on 26 full weeks. 

The first, part, year doesn't get resolved by the second or any subsequent full year. It might do in the part year when you die.