Tax - Pensioner Tax question

KPeters

Hi
I ended last year on 192L tax code and started this new year on a different one 75L.  I don't understand why?

I am an 82yr old pensioner on State pension of £227 per week (was £204 last tax year, before the 10% gov pension rise).  I also have an addition pension from Railway which is £152.02 pee 4 weekly (same amount for previous tax year).  I haven't paid tax at all up until 2022/2023 year.  Only paid 60p last year and tax code was 192L.  Tax seems to be deducted from private pension.

Got my first bank statement this tax year and my Railpen has gone from £152.02 to £133... I wondered why the reduction and turned out to be tax deduction.  So why has the tax code changed and why such a deduction, I gather that will be every payment (4 weekly)  so to me the government gave this pensioner a 10% rise which worked out £20 per month and then is getting about £19.50 of it back via tax.  I'm low income and get help with rent and council tax.  I'm confused?

I can't set up this government gateway thing as I don't have 2 forms of ID and I would ring but I don't really understand what I need.  Is my tax code wrong.

Thank you for any clarification 

Dazed_and_C0nfused

It's because DWP are paying you a lot more (in relative terms) State Pension whilst your Personal Allowance has remained the same.

Tax is never deducted from State Pension payments so you pay extra on your other pension.

The figures look fine to me.

Ayr_Rage

What is your GROSS annual income?

Please post separate details for both of your pensions.

chrisbur

KPeters said:

Hi


I am an 82yr old pensioner on State pension of £227 per week (was £204 last tax year, before the 10% gov pension rise).  

 .... the government gave this pensioner a 10% rise which worked out £20 per month and then is getting about £19.50 of it back via tax.  I'm low income and get help with rent and council tax.  I'm confused?



Thank you for any clarification 

A weekly pension of £227 that last year was £204 is an increase of £23 per week which is almost £100 a month.
You indicate that a small amount of tax was being deducted last year so all of that £100 a month is going to be taxable (as advised by Dazed the tax allowance has not changed this year) at 20%  That is an extra tax charge of £20 a month.
The code change from 192L to 75L is a change of 117 places which means you pay extra tax on £1170 of £234 a year or £19.50
a month.

[Deleted User]

Hi,

KPeters said:

Hi
Got my first bank statement this tax year and my Railpen has gone from £152.02 to £133... I wondered why the reduction and turned out to be tax deduction.  So why has the tax code changed and why such a deduction, I gather that will be every payment (4 weekly)  so to me the government gave this pensioner a 10% rise which worked out £20 per month and then is getting about £19.50 of it back via tax.  I'm low income and get help with rent and council tax.  I'm confused?

did you mean £80 per month?

Dazed_and_C0nfused

frugalmacdugal said:

Hi,

KPeters said:

Hi
Got my first bank statement this tax year and my Railpen has gone from £152.02 to £133... I wondered why the reduction and turned out to be tax deduction.  So why has the tax code changed and why such a deduction, I gather that will be every payment (4 weekly)  so to me the government gave this pensioner a 10% rise which worked out £20 per month and then is getting about £19.50 of it back via tax.  I'm low income and get help with rent and council tax.  I'm confused?

did you mean £80 per month?

It's virtually £100/month.

£204/week becoming £227/week = £1,196/year 😄

KPeters

I'm sorry I really didn't understand when i wrote it.  My numbers were rubbish!.  I understand now.. that the rise in pension is £100+ a month so £19.50 is taken in tax from the other pension.  So I do get it now.

Thank you all for explaining 🙏 

RobO959

- - - - -   First post, gently, please!   - - - - -
Thanks all for the above explanation of what is actually happening, I'm also interested in WHY if anyone has the insider knowledge?    -  I've worked all my life in relatively low paid jobs, tried to be very cautious with my investments and avoiding sharks and now find myself, as does my wife, in the trap between living reasonably comfortably in retirement and not being able to access benefits of any kind.  Across the board HM Govt give we pensioners 10% and then take away via increased personal tax to effectively cut the amount of money we have to live on.
I have no doubt that this is intentional but has anyone heard of any remedial action by HM Govt. to restore that little bit of extra we saved for? 
Will it be one of those "sweeteners" just before the GE?
Has anyone any suggestions for making up what the taxman has removed?  The older I/we get the less mobility we have and ability to work - and it costs fuel to travel to any kind of work too; it has to be beneficial .... to me/us!
Many thanks

molerat

Across the board HM Govt give we pensioners 10% and then take away via increased personal tax to effectively cut the amount of money we have to live on.

State pension, as with any pension or work income, is taxable income.  It is not taxed at source so the only way of taxing it is by reducing your tax code so the tax due is deducted from any other income and if that is not possible HMRC will issue a bill.

If you earned £10K from one job and 10K from another HMRC could issue a code of 1000L to one and 257T to the other meaning all the tax would be deducted from that second job.  With a state pension of £10K and another pension of £10K HMRC deduct the state pension from the tax allowance and give a code of 257L to the second pension.  Exactly the same outcome from a total income of £20K wherever it comes from.  This has happened every year for decades.  The problem this year, which has made it very noticeable, is the large 10.1% increase in the state pension coupled with the freezing of the personal allowance, where the annual increase would usually cover any state pension increase, meaning there is a noticeable tax deduction from the other income stream.

If the pension increase was 1%, 2% or 20% the outcome would be the same, you would pay tax on that increased amount.  Yes you will be paying more tax but you will also be seeing more in your pocket.  In another post I said I was paying £38 per month more tax on my work pensions but my state pension was paying me £72 more per 4 weeks on top of my work pension increase.

[Deleted User]

molerat said:

Across the board HM Govt give we pensioners 10% and then take away via increased personal tax to effectively cut the amount of money we have to live on.

State pension, as with any pension or work income, is taxable income.  It is not taxed at source so the only way of taxing it is by reducing your tax code so the tax due is deducted from any other income and if that is not possible HMRC will issue a bill.

If you earned £10K from one job and 10K from another HMRC could issue a code of 1000L to one and 257T to the other meaning all the tax would be deducted from that second job.  With a state pension of £10K and another pension of £10K HMRC deduct the state pension from the total tax allowance and give a code of 257L to the second pension.  Exactly the same outcome from a total income of £20K wherever it comes from.  This has happened every year for decades.  The problem this year, which has made it very noticeable, is the large 10.1% increase in the state pension coupled with the freezing of the personal allowance meaning there is a noticeable tax deduction from the other income stream.

I think the point that the poster is making is that, while the state pension has increased by 10.1% any additional tax reduces that uplift by up to 20% - the effect of fiscal drag. 

There is going to be a huge increase in the number of people who have ‘joined the tax paying community’ or the ‘40% club’ as a result of this. 

But then it’s the same for every ‘pay rise’. At least there is no NIC deducted from the increase. 

Ayr_Rage

"40%" club, I wish, try living in Scotland, when I get my state pension in 2025 40+X% will go back to the tax man and who knows what X will be then if the SNP are still in charge.

I know I am lucky having a very good company pension but the Scottish Government seem hell bent on discouraging us to live here.