Tax code anomaly when changing from employee to DB pensioner - was 1288L, now 1257L

itsmeagain

Hi all...

I was an employee & active DB member until June this year, took redundancy, since taken early DB pension (all in the same tax year).

In the initial 2/3 months of this tax years employment, my tax code was 1288 (incremented for work from home tax relief). My last pay doc & P45 also shows 1288. My pension statement now has a tax code of 1257 though (lost the WFH tax relief within the same tax year).

Is the new tax code correct, or should the 1288 continue for this year, due to having already gained the WFH allowance by working from home for a couple of months in this current tax year?

Furthermore, the pension statement says that tax queries can only be made via HMRC (not the HR payroll department that runs the pension payroll), but HMRC must have already told them to use 1288 when I was an employee a few months back. Would HMRC have re-issued the tax code (back down to 1257) or has payroll messed up by forgetting it should be 1288, or what else please?

Albermarle

I retired in July , with a tax code of £1288 and started a DB pension in September with a tax code of £1288 . So probably yours is wrong , 

Dazed_and_C0nfused

Normally you would expect to lose WFH expenses for the period after they no longer apply i.e. you stop working.

But if your WFH claim was because you had to WFH due to Covid-19 then you can retain the full amount for the year.

I suspect what's happened is that the pension company put you on the emergency tax code (1257L) when you first started getting the pension and it hasn't been updated since then.

The other thing to consider is whether you had a job and pension at the same time (for tax purposes) means you owe some extra tax.

itsmeagain

Dazed_and_C0nfused said:

Normally you would expect to lose WFH expenses for the period after they no longer apply i.e. you stop working.

But if your WFH claim was because you had to WFH due to Covid-19 then you can retain the full amount for the year.

I suspect what's happened is that the pension company put you on the emergency tax code (1257L) when you first started getting the pension and it hasn't been updated since then.

The other thing to consider is whether you had a job and pension at the same time (for tax purposes) means you owe some extra tax.

Thanks... I didn't have a job & pension running at the same time. There's never been a need to use an emergency/updated tax code as a pensioner. Its the same company payroll that I was an employee at, that issued my last but one pay doc (1288), my final pay doc (0T), issued my P45 (0T) and now pension (1257).

The only temporary tax code was the 0T from leaving with VR. The HR documentation said that this would be corrected if taking pension within the current tax year.

It has been corrected, but to 1257 instead of 1288.

Dazed_and_C0nfused

1257L is the emergency tax code.

Can you confirm the payment dates for your final two salary payments and first two payment dates for your pension?  And was the salary paid monthly?

itsmeagain

Albermarle said:

I retired in July , with a tax code of £1288 and started a DB pension in September with a tax code of £1288 . So probably yours is wrong , 

Thanks. I did see your response and I was responding to it before you edited it. I guess you forgot that the code has a '0' to be added, thus the 50p per month is actually £5? I did the same once too - it's old age!

itsmeagain

Dazed_and_C0nfused said:

1257L is the emergency tax code.

Can you confirm the payment dates for your final two salary payments and first two payment dates for your pension?  And was the salary paid monthly?

I was paid monthly on the 28th of each month in arrears for April, May, June, then got all my VR & holiday adjustments on 28th July (28 days after leaving). Pension is now paid monthly on the 1st of each month in advance and back dated to 1st July (day after I left work).

Dazed_and_C0nfused

So it seems you did have a job and pension at the same time for tax purposes. 

Paid by employer and pension company on 1 July (tax month 3).

If 1288L and 1257L codes were used by the employer and pension company then you will likely owe tax in relation to having concurrent sources of income.

Albermarle

itsmeagain said:

Albermarle said:

I retired in July , with a tax code of £1288 and started a DB pension in September with a tax code of £1288 . So probably yours is wrong , 

Thanks. I did see your response and I was responding to it before you edited it. I guess you forgot that the code has a '0' to be added, thus the 50p per month is actually £5? I did the same once too - it's old age!

At least I realised the mistake quite quickly , so maybe not that old yet 

itsmeagain

Dazed_and_C0nfused said:

So it seems you did have a job and pension at the same time for tax purposes. 

Paid by employer and pension company on 1 July (tax month 3).

If 1288L and 1257L codes were used by the employer and pension company then you will likely owe tax in relation to having concurrent sources of income.

Thanks... Please explain... I think I was owed tax because my tax code was 0T in July for my VR, meaning i had neither the 1288 or 1257 allowance at the end of employment.

I appreciate that my tax will reflect the whole year combined earnings, whether it be working income or pension, minus a tax free part of the VR.

Why is July 1st  month 3 and not month 4? Is it because each tax month doesn't start on the 1st?

How does any of this justify the change from 1288 to 1257, or should it still be 1288?

Dazed_and_C0nfused

The tax year starts on 6 April.

Month one is 6 April to 5 May and so on so 1 July falls into month 3.

If you were employed and getting a pension at the same time then I don't think either 1257 or 1288 is likely to be correct as they won't reflect the tax you owe.

Can you post the taxable income from each payment on 1 July and what tax code was used?