Tax on State Pension

Ref44

I reached State Pension age in the middle of November, having been claiming my Occupational Pension since 2009. Atb the weekend, I got an email from HMRC advising that my tax code had changed. No problem I thought; it was expected.

However logging into my Gateway account I find the coding notice is assuming a full years SP. I phoned HMRC firts thing this morning to point out that the SP only came into payment in November.

The advisor stated that this was the figure they had been given by DWP. Further questioning revealed that the DWP had advised that my pension is £178 per week which is correct. Asking the advisor why this figure had been multiplied by 52 elicited the response that this is standard practice and that the correct figure will be used in April when tha amount of pension paoid this tax year is advised by the DWP. Pointing out this will mean me paying around £1k in tax on pension not recieved, the advisor became very defensive and stated that it was policy and above his pay grade.

Surely this must be wrong; has anyone else had this problem? If it not policy as claimed a complaint will be sent via email.

p00hsticks

Ref44 said:

I reached State Pension age in the middle of November, having been claiming my Occupational Pension since 2009. Atb the weekend, I got an email from HMRC advising that my tax code had changed. No problem I thought; it was expected.

However logging into my Gateway account I find the coding notice is assuming a full years SP. I phoned HMRC firts thing this morning to point out that the SP only came into payment in November.

The advisor stated that this was the figure they had been given by DWP. Further questioning revealed that the DWP had advised that my pension is £178 per week which is correct. Asking the advisor why this figure had been multiplied by 52 elicited the response that this is standard practice and that the correct figure will be used in April when tha amount of pension paoid this tax year is advised by the DWP. Pointing out this will mean me paying around £1k in tax on pension not recieved, the advisor became very defensive and stated that it was policy and above his pay grade.

Surely this must be wrong; has anyone else had this problem? If it not policy as claimed a complaint will be sent via email.

Are you sure the new code hasn't been issued/applied with a M1 (non-cumulative) qualifier ? This is the way HMRC usually treats new State Pension adjustments. M1 means that even though the code has been adjusted to include a whole years pension, past months are ignored. Each month going forward is considered individually, so you will get a tax allowance of one twelfth of the code amount, which is correct.

Ref44

Thankyou for that, I will log in again to check. Would have been nice for the adviosr to have explained this if it is the case.

Albermarle

Ref44 said:

Thankyou for that, I will log in again to check. Would have been nice for the adviosr to have explained this if it is the case.

You are probably putting too much faith in the depth of knowledge of some HMRC call centre staff.

Dazed_and_C0nfused

Ref44 said:

I reached State Pension age in the middle of November, having been claiming my Occupational Pension since 2009. Atb the weekend, I got an email from HMRC advising that my tax code had changed. No problem I thought; it was expected.

However logging into my Gateway account I find the coding notice is assuming a full years SP. I phoned HMRC firts thing this morning to point out that the SP only came into payment in November.

The advisor stated that this was the figure they had been given by DWP. Further questioning revealed that the DWP had advised that my pension is £178 per week which is correct. Asking the advisor why this figure had been multiplied by 52 elicited the response that this is standard practice and that the correct figure will be used in April when tha amount of pension paoid this tax year is advised by the DWP. Pointing out this will mean me paying around £1k in tax on pension not recieved, the advisor became very defensive and stated that it was policy and above his pay grade.

Surely this must be wrong; has anyone else had this problem? If it not policy as claimed a complaint will be sent via email.

As others have explained it is perfectly normal and ensures you pay the correct tax each occupational pension pay day from now on.

If HMRC only included the actual amount of State Pension you are entitled to in the current tax year then one of two things would happen,
1.  If the code was issued on a non cumulative basis you would owe tax when the tax year is reviewed next summer.  Something HMRC try and avoid.
2.  If the code was issued on a cumulative basis you would pay far more tax all in one go on your next occupational pension pay day.

Given this must happen to tens (hundreds?) of thousands of new State pensioners each year why the adviser couldn't explain this is a sad reflection on their knowledge, particularly as it is all explained in their own internal guidance.

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye76086

dgp1000

This happened to me without any warning. So I rang again and spoke to someone else who was far more helpful and who even rang me back to check I was OK with it.

Thanks for the link to the HMRC guidance.