Two separate tax codes.

hioneday

I am in receipt of two pensions, one my own and one of my late husbands. I am drawing a state pension. I have just got advice of payments for both Civil Service pensions, one pension is for £57.49 per month with a tax code of 138L and the other is for £85.62 per month with a tax code of 101T. The 101T code amount has 20p tax taken from it. I know this is not a large amount but every little helps when you are an OAP. I contacted HMRC and was told it was because I had now gone over the taxable amount due to an increase in the state pension. What is the point of giving me a rise and then take tax out of it. Can this be right or was I just being fobbed off because the amount taken isnt worth the bother.

chrisbur

Assuming that the tax allowance left after the state pension is correct then it has been split badly.  The two codes of 138L and 101T add up to an allowance of about £2400 and your two pensions add up to about £1717  You only need a small amount taking off the 138L and adding to the 101T and no tax on either to pay.  I believe that you can adjust the figures on your personal tax account to do this.

128L and 111T would more than cover it

molerat

Are those both the gross amounts as if so the codes are not correctly split. The total income is £1717.32 and you have a remaining allowance of £2390 so you need the 101 code upping a few points and deducting it from the 138 to take you out of tax.  You need to speak to HMRC and give them the correct annual income amounts from both sources or you can do it in your on line tax account.

Dazed_and_C0nfused

hioneday said:

I am in receipt of two pensions, one my own and one of my late husbands. I am drawing a state pension. I have just got advice of payments for both Civil Service pensions, one pension is for £57.49 per month with a tax code of 138L and the other is for £85.62 per month with a tax code of 101T. The 101T code amount has 20p tax taken from it. I know this is not a large amount but every little helps when you are an OAP. I contacted HMRC and was told it was because I had now gone over the taxable amount due to an increase in the state pension. What is the point of giving me a rise and then take tax out of it. Can this be right or was I just being fobbed off because the amount taken isnt worth the bother.

Unfortunately you seem to have got an advisor who doesn't understand HMRC's own systems.

When calculating your tax code ready for the new tax year HMRC will estimate the income they expect you to receive in the new tax year and that forms the basis of your tax codes.

In this instance it looks like they have estimated your second pension to be paying no more than £1019/year.  Hence the tax code of 101T.

All you need to do is calculate what you expect this pension to pay in the 2022:23 tax year and then update this on your Personal Tax Account.  This should prompt HMRC to automatically review your tax codes and allocate some of your unused tax code allowances to the second pension.

For example if you estimate it as £1030 then you will have a new tax code of 103T at the second pension and your main tax code will be reduced slightly, to 137L or 136L.

The company paying the second pension will include any tax refund due (even if only 20p) the first time they pay you using the new tax code.