Tax on state pension

jem16

RG2015 said:

badmemory said:

You know the saying "patience is a virtue"?  Well whoever made it up was talking about HMRC.

I do not believe this can change, so my June company pension could have a deduction of 3 months of income tax on my SP. Potentially, this could keep increasing every month until the DWP report my SP to HMRC.

Why wait any longer? State benefits are always paid gross. You know the amount that you will receive in state pension this tax year. 

So phone up HMRC - best time is 8am - and say you’ve now started receiving your state pension but so far your tax code hasn’t changed and you’d like to get it sorted now rather than wait. Give them the expected amount. 

RG2015

jem16 said:

RG2015 said:

badmemory said:

You know the saying "patience is a virtue"?  Well whoever made it up was talking about HMRC.

I do not believe this can change, so my June company pension could have a deduction of 3 months of income tax on my SP. Potentially, this could keep increasing every month until the DWP report my SP to HMRC.

Why wait any longer? State benefits are always paid gross. You know the amount that you will receive in state pension this tax year. 

So phone up HMRC - best time is 8am - and say you’ve now started receiving your state pension but so far your tax code hasn’t changed and you’d like to get it sorted now rather than wait. Give them the expected amount. 

I have spoken to HMRC 2 or 3 times recently, on a different issue, and mentioned this. Their response is that I should not worry myself as DWP will tell them and it will all get sorted in due course.

I did not feel inclined to push the issue as I am happy to sit on the cash while I wait.

I still feel the same way, but just wanted to know the limit, and @molerat has provided the perfect answer, along with the relevant citation.

RG2015

I needed to contact HMRC on my wife's account so I took the opportunity to ask about tax on my State Pension.

They still had heard nothing from DWP, but asked me to give them details of my state pension so they could update my tax code.

This has now been updated on my PTA, and my tax code has been reduced to collect tax on my 2022/2023 SP over the next 10 months.

RG2015

RG2015 said:

I needed to contact HMRC on my wife's account so I took the opportunity to ask about tax on my State Pension.

They still had heard nothing from DWP, but asked me to give them details of my state pension so they could update my tax code.

This has now been updated on my PTA, and my tax code has been reduced to collect tax on my 2022/2023 SP over the next 10 months.

The DWP wrote to me on 5th January to inform me of my pension details, and yet we are now in June they have not informed HMRC.

For information, the following is now included on my PTA online. I have to say that I am struggling to follow the arithmetic, and the terminology. Not only have I underpaid tax to date, but I also need to pay ongoing tax on my SP.

Your PAYE Income Tax calculation

Estimated tax you owe

We estimate that you have not paid enough Income Tax so far this tax year. You currently owe

£286.40

How this will be collected

We will start to collect this amount straight away.

To do this we have reduced your tax-free amount by £1,725. This means that you will pay more tax until 5 April 2023, so that we can collect the £286.40 owed.

molerat

Have they given you a suffix  X code ?

£286.40 paid back over 10 months = equivalent of £343.68 for a full year = £1718 removed from code on an M1 basis, efectively reducing your allowance by £1431 over the next 10 months collecting £286 tax. Close to the £1725.  Have they set the full SP against your code yet ?

RG2015

molerat said:

What tax code have they given you -suffixed with X ?

£286.40 paid back over 10 months = equivalent of £343.68 for a full year = £1718 removed from code on an M1 basis, efectively reducing your allowance by £1431 over the next 10 months collecting £286 tax.

I was on 1383M made up of £12,570 personal allowance plus £1,260 marriage allowance.

I am now on 351MX. This is £13,830 - £1,725 - £8,589 = £3,516.

The figures look about right, although the calculation pages in my PTA online are not particularly easy to follow. 

molerat

They are taxing you on 1/12th of £8589 and £1725 each month, which is about right, and will square it all up next year.

sheramber

Not only have I underpaid tax to date, but I also need to pay ongoing tax on my SP

correct.

By reducing your tax allowances  by 8589 from now the correct amount of tax due on your income including your state pension pension will be deducted over the rest of the tax year.
 
But that leaves tax underpaid from 6 April to date- £286.40 

That is collected between now and 5 April 2023 by reducing your tax allowances by 1725 so you pay an extra amount of tax each month to account for that.

RG2015

molerat said:

They are taxing you on 1/12th of £8589 and £1725 each month, which is about right, and will square it all up next year.

Thanks.

Your statement above is so much easier to understand!

RG2015

Can I expect my State Pension to be correctly reported on my PTA online once the DWP have officially notified HMRC.

At the moment they are reporting it as an estimated amount.

Your income from other sources

StatePension

Your estimated taxable income is£8,757

Update or remove