Pension increased by £201, but now I am paying £212 per annum more tax.

pothole65

I have just received my increase in BP pension from £6659 to £6860 an increase of £201, my tax code last year was 407L and I paid £516 tax.

They have changed my tax code from 407L to 322L, and on my calculation this means I am paying £210 more tax, so despite the increase I am worse off than last year, does this sound right.

Tried to get through to the tax office to query this but gave up on the phone, hopefully someone will explain this to me

Flugelhorn

do you get state pension as well? The increase in that might mean you are paying more tax and it will be taken off the private pension and not the state pension

tightauldgit

Did you maybe underpay last year and that's why they changed your tax code?

sheramber

Why was your code number reduced?

if you also receive state pension that will have increased so more of your personal allowance would used up by  it, leaving less personal allowance to set against your private pension.

Your total income has increase by the increase in your private pension and the increase in your state pension but all the tas due is deducted from your private pension.

molerat

According to their posting history OP was 65 in 2020 so will be receiving SP now.  The SP has increased by £975 over last year so a code reduction of 97 points is possible and could result in £195 more tax being deducted.

pothole65

I do receive a state pension it has just increased to £720.16, although I was working up to 2010 and due to health reasons retired early and survived on my BP pension, I was not entitled to the full pension as it all changed in 2016. If I had sponged off the state instead of doing it my way, my stamp would have been paid and I would have received a full state pension.

So my state pension has risen but my private pension has been hammered for more tax.

p00hsticks

pothole65 said:

I was not entitled to the full pension as it all changed in 2016. 

Transitional rules mean that you will be receiving at least what you had been entitled to under the old rules - the introduction of the new State Pension has not left you worse off than under the previous system. 

pothole65

Think I have figured it out now, my Personal Allowance is 12570 less my state pension which has increased to 9345 leaving me a tax free amount of £3225, obviously the state pension goes up and I get less allowance, just have to say goodbye to my BP pension increase.

comeandgo

pothole65 said:

I do receive a state pension it has just increased to £720.16, although I was working up to 2010 and due to health reasons retired early and survived on my BP pension, I was not entitled to the full pension as it all changed in 2016. If I had sponged off the state instead of doing it my way, my stamp would have been paid and I would have received a full state pension.

So my state pension has risen but my private pension has been hammered for more tax.

your state pension is taxable income but you get it paid to you gross, the extra tax due on the increase is taken from your BP pension.  If you add both pensions together you will see in increase you have.

Flugelhorn

pothole65 said:

I do receive a state pension it has just increased to £720.16, although I was working up to 2010 and due to health reasons retired early and survived on my BP pension, I was not entitled to the full pension as it all changed in 2016. If I had sponged off the state instead of doing it my way, my stamp would have been paid and I would have received a full state pension.

So my state pension has risen but my private pension has been hammered for more tax.

Happens to everyone with a private pension and state pension - as the untaxed at source state pension increases, the the tax has to come off the other sources of income you have. OH has had the increase in SP and Occ pension, the tax coding has been adjusted to reflect the overall amounts  

Flugelhorn

pothole65 said:

Think I have figured it out now, my Personal Allowance is 12570 less my state pension which has increased to 9345 leaving me a tax free amount of £3225, obviously the state pension goes up and I get less allowance, just have to say goodbye to my BP pension increase.

or hello to the SP increase? which will be more when you get the full 4 weeks at the new rate