Claiming State Pension and Working

eliza2811

Hello,

Apologies if i've posted in the wrong forum.

My husband started claiming his state pension from 9th July this year. He gets £203.85 a week.  At the same time, he wants to continue full time work.  He works as agency staff so generally earns around £14000 to £15000 a year before deductions.  It varies as he's free to not come into work if he doesn't want to or isn't needed.   I understand he doesn't pay NI conts from now on.  He has informed his employer about the pension etc.  Gets paid weekly and as yet, no change to the tax code in his payslip.

The HMRC sent a letter saying his tax code is changing from 1257L to 197L X dated 10th July.

We're now a bit confused regarding the tax situation.  So if he gets say for example £25000 a year from both incomes, is only £1970 not taxed ?  He won't ring HMRC as he hasn't got the patience to wait in their queue !! Often can't get his head around financial information discussed over the 

phone.

Please can anyone shed any light for me. Thanks very much.

Dazed_and_C0nfused

The new tax code is to be used on a non cumulative basis i.e. against each payment from now on without looking back at earlier payments in the same tax year.

So on a weekly basis he will get tax code allowances of £38.  The rest of the allowances (£203) are being used by his State Pension, which will always be paid without tax being deducted.

As he was already paying tax it looks spot on and from what you've posted there is nothing to contact HMRC about.

sammyjammy

The £1970 will be his allowance for the job, state pension is not taxed hence the change in tax code to account for it.

Flugelhorn

the tax code with an X at the end is an emergency tax code, presumably until they sort out the exact figures. It only applies to the work he does and not to the pension so he would still get the whole of the pension

he would still get 1270 tax free a year out of the 25k ie the state pension and some of the work he does but all the tax will come from his agency work so not much of that will be tax free

Dazed_and_C0nfused

Flugelhorn said:

the tax code with an X at the end is an emergency tax code, presumably until they sort out the exact figures. It only applies to the work he does and not to the pension so he would still get the whole of the pension

he would still get 1270 tax free a year out of the 25k ie the state pension and some of the work he does but all the tax will come from his agency work so not much of that will be tax free

The emergency tax code is 1257L.

An X simply signifies that the tax code must be operated on a non cumulative basis.  

From what the op has posted the correct figures are being used, there is nothing which needs changing.

p00hsticks

Flugelhorn said:

the tax code with an X at the end is an emergency tax code, presumably until they sort out the exact figures.

No, as Dazed_and_C0nfused says, it indicates that the employer should apply the code on a non-cumulative basis. The topic has come up on these boards before (most usually with people mistakenly thinking they'll be overtaxed). It's how HMRC handle taxing someone the first year that they claim the state pension. HMRC deduct a whole years state pension amount from the persons tax code but then add the 'non-cumulative' indicator. This means that , as the code is only applied from the start of when the person gets their first state pension amount, it automatically takes into account the proportion of the year in which the state pension is actually payable.

Dazed_and_C0nfused

@p00hsticks is spot on, this is just normal for most people.

One time it is done differently is where the new State Pensioner wasn't previously paying tax so they have some unused tax code allowances and in that situation the actual State Pension is included in the code rather than the annualised amount.

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

Flugelhorn

p00hsticks said:

Flugelhorn said:

the tax code with an X at the end is an emergency tax code, presumably until they sort out the exact figures.

No, as Dazed_and_C0nfused says, it indicates that the employer should apply the code on a non-cumulative basis. The topic has come up on these boards before (most usually with people mistakenly thinking they'll be overtaxed). It's how HMRC handle taxing someone the first year that they claim the state pension. HMRC deduct a whole years state pension amount from the persons tax code but then add the 'non-cumulative' indicator. This means that , as the code is only applied from the start of when the person gets their first state pension amount, it automatically takes into account the proportion of the year in which the state pension is actually payable.

thanks - v useful, I'll look out for it next year

Marcon

sammyjammy said:

The £1970 will be his allowance for the job, state pension is not taxed hence the change in tax code to account for it.

Just to clarify...state pension is taxable if total income for the year is over the personal allowance. State pension is always paid gross and a common belief is it is therefore 'not taxable'.