Illogical tax codes on my 3 pensions?

poundsNpence

With 2 years to go until I can claim my state pension, I currently have payments from 3 pensions.

A pays £3401pa - a figure that will never change
B pays £1842pa - a figure that will never change
C pays £2696pa - with annual increases of anything up to 5%
So a TOTAL income this year of £7939

A has tax code 659L
B has tax code 200T
C has tax code 300T

These codes are in place after I wrote to HMRC a few months back asking why tax was being deducted from pension C. It was only a few pence a month, which they apparently agreed was wrong as I received these updated codes.

What I don't understand is why they've put the highest code 659L on pension A even though I've told them the amount will never change but have put code 300T on pension C, which WILL increase every year and so will eventually exceed the tax code currently assigned to it.

Is there a logic that I'm not seeing, or should I maybe contact them to see about getting the codes swapped?

Thanks in advance for any advice forthcoming.

Dazed_and_C0nfused

The logic is that HMRC will always retain any spare allowances at what they class as your "main" source.  Main doesn't necessarily mean largest in monetary terms.

So if they (or you) have estimated 2000 at B and 3000 at C the remaining surplus will be retained at A.

Why do they need changing again 🤔

NB.  The L suffix shows which is the main source in HMRC's eyes.

molerat

They have likely used the higher code for A because it was either the first noted source or the higher amount.  If those 2 are genuinely never going to change I would ask them to allocate 340T to A, 184T to B and the remainder, 635, to C as your "main" income source with the L suffix.  It will make no difference to the tax deducted but will future proof your code allocation. When your SP comes into play they can then allocate (maybe depending on SP amount) BR to both A & B and your total remaining allowance against C.  As a side question why do your codes only add up to 1159, is that going to change next year ?

poundsNpence

Thanks for the replies and info @Dazed_and_C0nfused and @molerat

As it's mostly to do with my dislike for things that don't seem quite right, I suppose it's really nothing too major to worry about getting changed just yet. But yes, C will eventually increase above the code currently attached to it, so will need sorting at some point.

Probably something for the savings forum, but from what I can tell, the 1159 is due to HMRC having deducted 975 "untaxed interest on savings and investments" from my 12570 personal allowance. I assume that relates to savings interest from FY22-23 as the figure for this year will be closer to 2240. That is something that has also confused me as, from reading https://www.moneysavingexpert.com/savings/tax-free-savings/ I thought that due to my total income from pensions and savings being below 18570 the 12570 would increase rather than decrease?

molerat

If you have spare allowance and interest they will often deduct that interest from your code to fill the gap.  It makes no difference to the amount of tax you pay as your income is still not above the reduced allowance, just one of the weird illogical things they do.

poundsNpence

Thanks again @molerat.

Yes, that certainly ticks the weird illogical box!