Personal Allowance reduction 1175L after taking pension

Trevreyno

I recently started taking (on February 1st 2023)my final salary pension at 55. A 25% tax free lump sum and a pension of £5400 per year. I still work part time and earn £12,025 per year. HMRC have just given me my new tax estimate and code for next year (23/24)1175L which they say is because of an underpayment of £872 for this year (22/23)

However I will have received only 2 pension payments  totalling £900 and wages for the year of £12,025 which is a total taxable income of £12,925?

Surely this is wrong I don’t understand where the under payment of £872 comes from,I’ve tried phoning them but it seems impossible to get through. 

Dazed_and_C0nfused

Trevreyno said:

I recently started taking (on February 1st 2023)my final salary pension at 55. A 25% tax free lump sum and a pension of £5400 per year. I still work part time and earn £12,025 per year. HMRC have just given me my new tax estimate and code for next year (23/24)1175L which they say is because of an underpayment of £872 for this year (22/23)

However I will have received only 2 pension payments  totalling £900 and wages for the year of £12,025 which is a total taxable income of £12,925?

Surely this is wrong I don’t understand where the under payment of £872 comes from,I’ve tried phoning them but it seems impossible to get through. 

Are you absolutely certain you have read your tax code correctly?

A tax code of 1175L suggest HMRC are trying to collect more like £175 in unpaid tax.

Perhaps you could check your tax code and clarify?

Often a first pension payment is made using the emergency tax code (1257L) and that means you can owe tax as you have received two lots of tax code allowances in one week or month.

How much tax has been deducted from the £900 pension you have been paid?

Trevreyno

Yes the tax code is 1175L I’d assumed this is a reduction on my personal allowance for 23/24 which would allow them to take more tax each week to recover the underpayment?

,My normal tax code is 1257 but after the first pension payment went to 1257LX

So far I have only received one pension payment on February 1st of £360 after a BR tax deduction of £90. 

Dazed_and_C0nfused

Trevreyno said:

Yes the tax code is 1175L I’d assumed this is a reduction on my personal allowance for 23/24 which would allow them to take more tax each week to recover the underpayment?

,My normal tax code is 1257 but after the first pension payment went to 1257LX

So far I have only received one pension payment on February 1st of £360 after a BR tax deduction of £90. 

In that case the tax owed seems unrelated to the pension.

But I still think you are mistaken about owing £872.  You may owe some tax and yes, a lower tax code will be the normal way that is collected.

Have you actually read through your tax code notice from start to finish?