Pension Tax Deductions?

eastcorkram

badmemory said:

The best practice with both earned & pension income is that the codes should be applied as follows, the reason being that the earned income may cease abruptly due to stopping work but the pension income will continue.  So state pension if being taken gets first bite of the £12570.  Then any pensions get the next bite.  Then earned income.  You will need to ensure that HMRC are doing it in that order as they tend to do employment then pension not the other way.  If you unfortunately suddenly get too ill to work you do not need to be having a battle with HMRC to get your tax sorted out.

As it's HMRC that allocate them though, how do you have any say in it? If they do it one way, and you'd like it changed, do they just agree to it?

Dazed_and_C0nfused

eastcorkram said:

badmemory said:

The best practice with both earned & pension income is that the codes should be applied as follows, the reason being that the earned income may cease abruptly due to stopping work but the pension income will continue.  So state pension if being taken gets first bite of the £12570.  Then any pensions get the next bite.  Then earned income.  You will need to ensure that HMRC are doing it in that order as they tend to do employment then pension not the other way.  If you unfortunately suddenly get too ill to work you do not need to be having a battle with HMRC to get your tax sorted out.

As it's HMRC that allocate them though, how do you have any say in it? If they do it one way, and you'd like it changed, do they just agree to it?

They should do yes, you can ask for your Personal Allowance, which is usually the main component of your tax code allowances, to be allocated in whatever way is best for you.

And although this comment was true pension freedoms have increasingly changed the landscape so a "pension" might just as easily cease abruptly.

Looking at the Real Time Information reporting requirements it doesn't seem as though pension payers have to tell HMRC how much is left in the (taxable bit of the) DC pension pot so they have no idea if it is going to produce regular income or not.

the earned income may cease abruptly due to stopping work but the pension income will continue

Albermarle

And although this comment was true pension freedoms have increasingly changed the landscape so a "pension" might just as easily cease abruptly

Not with a DB pension. So if the DB pension is over £12570, it makes sense to have the personal allowance with that in most circumstances I think ?