Widow's pension mis-reported the amount to HMRC and placed mum in high tax bracket

RascalFlatts

My father recently passed away, mum is able to receive half of his Civil Service pension. Aside from the CSP, she also has two former work pensions (she's now retired) plus her state pension.

When I looked it up online. It seem the CSP has wildly mis-reported her annual income from them (by a 500%+ increase). Strangely though, instead of this affecting the tax code for the CSP, it has resulted in her tax code from one of her other pensions being altered instead. Is that normal? I don't know how these things work.

The end result is a hefty reduction on her monthly income. I have updated the 'estimated annual income' for the CSP on the HMRC to what it should be (though, it wouldn't let me include 'pence' in this figure). We tried to get through the HMRC, over two hours on hold. Nobody answered, the battery on the phone ran out in the end.

• Will mum be refunded automatically?
• If now, how does she get it back?
• What's the best to contact HMRC to rectify this?

Thanks.

RascalFlatts

I can't find a way to edit my post.

In addition to being placed in the 40% tax bracket, this month's pension payment received by my mum is actually 50% less after tax. Why would it be 50% less if the tax bracket is 40% (albeit in error)?

purdyoaten2

The maximum deduction which can be made is 50% - probably, in this case, by using a K code. Can you provide some figures?

(Edit tapping the three dots top right)

Did she, per chance, receive arrears of husband’s pension paid in one month?

RascalFlatts

purdyoaten2 said:

The maximum deduction which can be made is 50% - probably, in this case, by using a K code. Can you provide some figures?

(Edit tapping the three dots top right)

Did she, per chance, receive arrears of husband’s pension paid in one month?

On her works pension, she was on tax code K34 prior to receiving the CSP (Civil Service Pension). After receiving it, she was switched to K1105X. Dropped from £472 (after tax) to £299 (after tax).

The CSP is tax code BRX.

The third pension is small and tax code BR.

Yes, she did receive a back pay from the CSP as the process dragged on so long (a whole other story about the CSP!). I did wonder if this is what caused the issue.

P.S There are no three dots above my post - I'm using my desktop computer. After some searching it appears members with few posts don't have the edit feature?

purdyoaten2

RascalFlatts said:

purdyoaten2 said:

The maximum deduction which can be made is 50% - probably, in this case, by using a K code. Can you provide some figures?

(Edit tapping the three dots top right)

Did she, per chance, receive arrears of husband’s pension paid in one month?

On her works pension, she was on tax code K34 prior to receiving the CSP (Civil Service Pension). After receiving it, she was switched to K1105X. Dropped from £472 (after tax) to £299 (after tax).

The CSP is tax code BRX.

The third pension is small and tax code BR.

Yes, she did receive a back pay from the CSP as the process dragged on so long (a whole other story about the CSP!). I did wonder if this is what caused the issue.

P.S There are no three dots above my post - I'm using my desktop computer. After some searching it appears members with few posts don't have the edit feature?

The ‘system’ will presume that the first payment of the pension will be repeated throughout the rest of the year. So, for example, if the pension was to be paid at the rate of 12000 per annum and the first payment included two months arrears the first payment would be 3000. 

HMRC has no indication that 3000 would not be received every month henceforth and will try to collect the correct tax on all sources of income by adjusting tax codes. 

The easiest option is to access your mother’s personal tax account and simply adjust the expected income from the new pension to the correct figure. Alternatively she would have to speak to HMRC to rectify. (They will, of course, speak to you having gone through security procedures with her) Best time - 8am sharp !

badmemory

I think her biggest problem may well be the X in the code which would mean each month being calculated the same & not cumulative.  Hopefully though they will sort that.

xylophone

The easiest option is to access your mother’s personal tax account and simply adjust the expected income from the new pension to the correct figure. 

OP seems to have done this.

I have updated the 'estimated annual income' for the CSP on the HMRC to what it should be (though, it wouldn't let me include 'pence' in this figure)

xylophone

We tried to get through the HMRC, over two hours on hold. Nobody answered, the battery on the phone ran out in the end.

And people wonder why I keep my landline......

The last time I had to speak to HMRC, I was dialling at 8am and even then had to wait over half an hour......

purdyoaten2

badmemory said:

I think her biggest problem may well be the X in the code which would mean each month being calculated the same & not cumulative.  Hopefully though they will sort that.

The reason they do that is to prevent the new code being applied retrospectively to the previous months of the year. However, with a 50% limit, this is a bit of a moot point!

RascalFlatts

xylophone said:

We tried to get through the HMRC, over two hours on hold. Nobody answered, the battery on the phone ran out in the end.

And people wonder why I keep my landline......

The last time I had to speak to HMRC, I was dialling at 8am and even then had to wait over half an hour......

This was the landline  but it's a cordless 

RascalFlatts

purdyoaten2 said:

The ‘system’ will presume that the first payment of the pension will be repeated throughout the rest of the year. So, for example, if the pension was to be paid at the rate of 12000 per annum and the first payment included two months arrears the first payment would be 3000. 

HMRC has no indication that 3000 would not be received every month henceforth and will try to collect the correct tax on all sources of income by adjusting tax codes. 

The easiest option is to access your mother’s personal tax account and simply adjust the expected income from the new pension to the correct figure. Alternatively she would have to speak to HMRC to rectify. (They will, of course, speak to you having gone through security procedures with her) Best time - 8am sharp !

That seems to be what happened. Yes, I updated the expected income amount (Thankfully, I'd already set her up with an online HMRC account a couple of months back). How quickly will they adjust the tax code based on my update? And, will the automatically refund my mum? I