Pension income is taking mum over her yearly personal allowance 31 January at 12:40PM in Pensions, annuities & retirement planning 22 replies 1.7K views

waringd

Hello - my mum is 79 this year and receives a fairly decent pension following the death of my dad four years ago.  The pension she receives takes her over the personal allowance and she therefore receives a fairly hefty tax bill in January each year.  Does anyone know if the other benefits pensioners receive (i.e. winter fuel payments/cold weather payment etc) goes towards her personal allowance.  It seems crazy that these benefits are available, only for pensioners to get taxed on them!  Thank you.

molerat

The vast majority of benefits, including those you mentioned, are not taxable.  Why is she receiving a tax bill ?  Her state pension should be deducted from her tax allowance and that code set against her other pension income resulting in all tax due being taken from that.  Or are you referring to her coding notice which are received around now ?

Linton

Winter fuel payment is tax free (Google)
Cold weather payment only seems to be for people on benefits so does Mum receive it given her "fairly decent pension"?

Does Mum receive her pension monthly?  Tax is normally deducted from each pension payment.  It seems odd that she gets a hefty tax bill in January.  

Dazed_and_C0nfused

molerat said:

The vast majority of benefits, including those you mentioned, are not taxable.  Why is she receiving a tax bill ?  Her state pension should be deducted from her tax allowance and that code set against her other pension income resulting in all tax due being taken from that.  Or are you referring to her coding notice which are received around now ?

Could be small private/works pension coupled with large State Pension.

Employers/pension payers can only deduct a maximum of 50% tax so a K code can mean insufficient tax is deducted during the year.

waringd

She is on a state pension only (around £1,100 a month).  This seems "fairly decent" as before dad passed away she was only receiving £200 a month (as she stayed at home to raise her children).

She has received a tax bill every year (around October, payable by the end of January) since my dad passed away.  Interesting that you feel she shouldn't be receiving a tax bill.

waringd

the tax bill is around £450 

p00hsticks

waringd said:

She is on a state pension only (around £1,100 a month).  This seems "fairly decent" as before dad passed away she was only receiving £200 a month (as she stayed at home to raise her children).

She has received a tax bill every year (around October, payable by the end of January) since my dad passed away.  Interesting that you feel she shouldn't be receiving a tax bill.

State pension is taxable but no tax is deducted at source.

So if that is her only income that explains the tax bill, as there is no other way available to deduct the tax.

Her state pension will be four weekly, not monthly, meaning that her total state pension (and taxable income)  will be 13 X £1,100 = £14, 300.

This is above her personal allowance of  £12, 570 so I'd expect her to be paying tax at 20% on the difference of £1,730 - so a tax bill of about £346 to pay a year.

The Winter Fuel Allowance and other Cost of Living paymetns aren;t taxable and so won;t be included inthe calculation of her taxable income .

MikeJXE

I'm no expert but £1,100 a month is just over the personal allowance and I don't think they can take the tax from your state pension so would have to issue a tax bill but that would be very small (£120 ish) I think 

My state pension is just under the threshold but my 2 tiny private pension takes it over and thats where they deduct the tax

warrenb

It is probably SERPS that is doing it, same thing happens with my Dad. He gets the state pension, but the SERPS element is lumped in with the payment which takes him over the personal allowance. He doesn't get enough from the tiny Private pension he has to pay the additional tax so get a tax bill once a year.

MikeJXE

p00hsticks said:

waringd said:

She is on a state pension only (around £1,100 a month).  This seems "fairly decent" as before dad passed away she was only receiving £200 a month (as she stayed at home to raise her children).

She has received a tax bill every year (around October, payable by the end of January) since my dad passed away.  Interesting that you feel she shouldn't be receiving a tax bill.

State pension is taxable but no tax is deducted at source.

So if that is her only income that explains the tax bill, as there is no other way available to deduct the tax.

Her state pension will be four weekly, not monthly, meaning that her total state pension (and taxable income)  will be 13 X £1,100 = £14, 300.

This is above her personal allowance of  £12, 570 so I'd expect her to be paying tax at 20% on the difference of £1,730 - so a tax bill of about £346 to pay a year.

The Winter Fuel Allowance and other Cost of Living paymetns aren;t taxable and so won;t be included inthe calculation of her taxable income .

That only works if the £1,100 is a guess and not actual 

We don't know how the OP has worked it out. I get paid weekly and do X * 52 / 12 to get my monthly maybe the OP did the same but (around £1,100) does seem like a guess. 

p00hsticks

waringd said:

the tax bill is around £450 

I'd worked it out at around £346 a year - but that's assuming that her tax code is 1257L, her state pension is actually paid 4-weekly and not monthly, and that the four-weely payment is for exactly £1,100 (which sounds like it might be an estimate). The bill should include details of the exact figures used and how the bill is calculated.