Should my mum be paying (this much) tax?

9000goats

Hi,

My mum received a letter in the last few days saying that she hasn't paid enough tax & owes HMRC. She's 65 and close to retirement age, but doesn't receive state pension yet.

Tax Calculation for 6th April 2020 - 5th April 2021. You have paid too little tax. You owe HMRC £836.60

She also received the same letter last year which said she owed abt £230 in tax, so this looks to be on top of that amount- but AFAIK nothing has changed.

The issue is that i've worked out she earns around £901.70 a month, or about £10,820.40 a year. 
I can't wrap my head around this as from my understanding she shouldn't be paying any tax if she's earning that amount.
The income from work is abt £269.24 monthly and she also receives a widow's pension at £632.46 monthly. She doesn't get any other income other than the amount from savings.

The letter shows 2 sources of income that seem confusing to me.
S.Y Pensions Authority       £8,533.20
State Pension/State Benefit £7,618.00
One of these must be the widow's pension but both are more than the amount she gets paid monthly so not sure if she's receiving more in some months than others.

Could one of these be a pension that she hasn't started receiving yet?

She received a letter for 6th April 2021 - 5th April 2022 with the tax code 476L.
Her tax code for 6th April 2020 - 5th April 2021 was 488L (replacing 316L)

This is the section of the letter that shows the tax calculation:

Income                                 Income         Income Tax
(Work)                                 £3,249.96      £36.00
S.Y Pensions Authority       £8,533.20       £728.00
State Pension/State Benefit £7,618.00     £0
Untaxed Interest                  £613              £0

Less your allowances:
Personal allowance £12,500.00
Your Total taxable income £7,514.16

Income Tax rate:
Personal savings allowance 0%  £613
Basic rate at 20%                        £6,901
Total                                             £7,514.00

Adjustments   £221.20

Total tax payable £1,601.40
Tax you've already paid £764.80
You owe HMRC £836.60


Thanks for any advice/help.

Dazed_and_C0nfused

Tax codes are only ever provisional so it's quite possible to owe money at the end of the tax year (in the same way you can pay too much and get a refund).

First thing is to check her current tax codes, if she has that much income from pensions she should be paying basic rate tax on the job (tax code BR).  What does her payslip show?

Also, it seems that the £836 is the cumulative amount owed, assuming the £221.20 is the amount owed to 5 April 2020.

Can you provide the full breakdown of the 476L tax code?

Actually, having re-read your post are you saying she doesn't actually get either the SY Pension or State Pension/Benefit?

[Deleted User]

Hi,

does her bank statement not tell her where payments are coming from?

Is the SY (South Yorkshire) payment from her late husbands work pension?

Thrugelmir

9000goats said:

I can't wrap my head around this as from my understanding she shouldn't be paying any tax if she's earning that amount.

You need to check the income numbers properly. Not simply try and second guess. Your mother will have received payment advices/payslips/annual summaries. 

chrisbur

Your estimate of £ 10820.40 for widow's pension and earnings is very close to the figures HMRC have for these items ie £10867.96  As you seem a bit vague on the figures I think we can assume those of HMRC are correct.
This just leaves the item ....
S.Y Pensions Authority       £8,533.20       £728.00

This is what is causing the tax under-payment when added to the tax under-paid for last year that comes to the £836.60

A quick google suggests that SY Pensions is South Yorkshire Pensions Authority.
Is it possible that there is another pension here?
If not I think HMRC will have to be contacted to see what is going on.
HMRC are usually quite good at splitting tax codes over several income sources but the tax code issued to SY Pensions is obviously miles out so I suppose it is possible someone else's pension details have been added where they do not belong.

elsien

What did she do when she got last year’s letter? Did she check or pay anything then? 

[Deleted User]

elsien said:

What did she do when she got last year’s letter? Did she check or pay anything then? 

The £221.20 on the calculation is from the previous year. Presumably HMRC stated in the previous calculation that it would be collected in the following year through PAYE.

Dazed_and_C0nfused

We definitely need the op to come back and clarify a few things.

Maybe the mum is getting a pension 9000goats isn't aware of?

Seems unlikely HMRC would be taxing them on a pension not actually being received but I guess anything's possible!

If there is two pensions and the job then chances are the tax is due because insufficient tax was deducted from the job but of there was only one pension then the calculation could be wrong.

[Deleted User]

9000goats said:

The issue is that i've worked out she earns around £901.70 a month, or about £10,820.40 a year. 

She doesn't get any other income other than the amount from savings.

The letter shows 2 sources of income that seem confusing to me.

S.Y Pensions Authority       £8,533.20
State Pension/State Benefit £7,618.00

One of these must be the widow's pension but both are more than the amount she gets paid monthly so not sure if she's receiving more in some months than others.

She received a letter for 6th April 2021 - 5th April 2022 with the tax code 476L.

Her tax code for 6th April 2020 - 5th April 2021 was 488L (replacing 316L)

This is the section of the letter that shows the tax calculation:

Income                                 Income         Income Tax
(Work)                                 £3,249.96      £36.00
S.Y Pensions Authority       £8,533.20       £728.00
State Pension/State Benefit £7,618.00     £0
Untaxed Interest                  £613              £0

Less your allowances:
Personal allowance £12,500.00
Your Total taxable income £7,514.16

Income Tax rate:
Personal savings allowance 0%  £613
Basic rate at 20%                        £6,901
Total                                             £7,514.00

Adjustments   £221.20

Total tax payable £1,601.40
Tax you've already paid £764.80
You owe HMRC £836.60

Hi,

you seem to be ignoring the income from S.Y Pensions Authority £8,533.20, as I asked before, is this a pension your mum gets from her late husband's work pension from South Yorkshire Pension Authority?

Check bank statements, to see if this is being paid each month.

molerat

She's 65 and close to retirement age, but doesn't receive state pension yet.

When will she reach SPA ?  Has she received her notification of payment yet ?  Could this be HMRC being slightly ahead of the game ?

[Deleted User]

molerat said:

She's 65 and close to retirement age, but doesn't receive state pension yet.

When will she reach SPA ?  Has she received her notification of payment yet ?  Could this be HMRC being slightly ahead of the game ?

But she receives a widows pension of £632.46 per month which would (nearly) correspond to the £7618 under state pension in the calculation.