Tax on state pension

RG2015

Dazed_and_C0nfused said:

1.  Your Personal Allowance is only reduced if your adjusted net income exceeds £100,000

2.  Your tax code allowances will be reduced by the State Pension amount to be coded in 2022:23

3.  The extra tax will depend on how much your earnings are in relation to your tax code.  If your earnings remain in the basic rate band then £161 would be about right.

a).  Not sure HMRC work like that.  I think it's much more likely to be 1 week at last year's rate and 51 at this year's rate.

b).  Have you been notified of underpaid tax for 2021:22 as part of a 2021:22 tax code?

Thank you for the quick response.

1. Sorry, I meant that my tax free amount would be reduced by £9,660.86 not my personal allowance.

a) If is is 7 days rather than 5 days it will be in my favour.

b) I have not received any notifications for 2021/2022, but it only relates to a few days so HMRC may ignore it. 

Dazed_and_C0nfused

b).  If you haven't been notified of tax owed for 2021:22 then I wouldn't expect it to ever be included in your 2022:23 tax code.

It would be included in your 2023:24 code (assuming it met thee criteria for inclusion in your code, i.e. less than £3,000 and you are already paying at least as much as the tax owed in PAYE tax).

badmemory

D & C is correct the taxable amount is 1 week at the old rate & 51 at the new.  As the DWP tell them how much you are going to get this figure is unlikely to be correct so you will need to check.

It is possible that about 1 year in 5 or 6 that the 52 weeks at the new rate is correct just to really confuse matters.

RG2015

The forecast page on the HMRC personal tax account online is so precise that I assumed they would use a similar calculation method for the actual pension.

The base figure is the weekly amount, the annual figure is 185.15 / 7 X 365.25, and the monthly figure is the annual figure divided by 12.

Why don't DWP apply these figures when informing HMRC?  

molerat

RG2015 said:

The forecast page on the HMRC personal tax account online is so precise that I assumed they would use a similar calculation method for the actual pension.

The base figure is the weekly amount, the annual figure is 185.15 / 7 X 365.25, and the monthly figure is the annual figure divided by 12.

Why don't DWP apply these figures when informing HMRC?  

The only figure there that is "real" is the weekly amount, the others are purely an illustration.

For tax code purposes, for a full year, they will use the amount accrued during the tax year which will usually be 51 new +1 old rate.

RG2015

molerat said:

RG2015 said:

The forecast page on the HMRC personal tax account online is so precise that I assumed they would use a similar calculation method for the actual pension.

The base figure is the weekly amount, the annual figure is 185.15 / 7 X 365.25, and the monthly figure is the annual figure divided by 12.

Why don't DWP apply these figures when informing HMRC?  

The only figure there that is "real" is the weekly amount, the others are purely an illustration.

For tax code purposes, for a full year, they will use the amount accrued during the tax year which will usually be 51 new +1 old rate.

Thank you. You can understand my confusion when words like “real”, “illustration” and “usually” are used.

I wait with eager anticipation to see what (and when) HMRC do to my tax code.

Dazed_and_C0nfused

You can see here what DWP send to HMRC, as @molerat says the weekly figure is the only one that counts.

As I understand it despite what is shown on your forecast on gov.uk nobody is ever paid 365.25 days pension a year and you certainly cannot be paid State Pension on a monthly basis.

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye76070

RG2015

Dazed_and_C0nfused said:

You can see here what DWP send to HMRC, as @molerat says the weekly figure is the only one that counts.

As I understand it despite what is shown on your forecast on gov.uk nobody is ever paid 365.25 days pension a year and you certainly cannot be paid State Pension on a monthly basis.

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye76070

Thanks again for you help.

I know that the SP is not paid monthly. My query was how the PAYE tax collection could be applied through a monthly company pension.

I inferred an arithmetically correct solution based upon the quoted figures (Illustrations).

I had not considered the less arithmetically accurate 52 week method.

jem16

RG2015 said:

a) The increase in state pension only takes effect from 11th April 2022, so the annual state pension for 2022/2023 needs to be reduced. This will need an adjustment to include 5 days at the old rate of £179.16. I make this to be £3.96

From the state pension point of view the increase takes effect from w/b 11th April as opposed to exactly the 11th April. The DWP never makes part weekly payments except at the very beginning when you start your pension and at the very end when you die. This is a more recent change for those reaching SPA from 6th April 2016. Previously the first few days weren’t paid as it was only whole week payments. 

If someone is paid on a Friday then their increase won’t begin till 16th April. 

RG2015

jem16 said:

RG2015 said:

a) The increase in state pension only takes effect from 11th April 2022, so the annual state pension for 2022/2023 needs to be reduced. This will need an adjustment to include 5 days at the old rate of £179.16. I make this to be £3.96

From the state pension point of view the increase takes effect from w/b 11th April as opposed to exactly the 11th April. The DWP never makes part weekly payments except at the very beginning when you start your pension and at the very end when you die. This is a more recent change for those reaching SPA from 6th April 2016. Previously the first few days weren’t paid as it was only whole week payments. 

If someone is paid on a Friday then their increase won’t begin till 16th April. 

Many thanks. This is good to know.