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State Pension and Personal Independence Payment

My apologies if this isn't the correct forum, it's my first post. My M-I-L is in receipt of her state pension as well as PIP. She is also in receipt of a small private widows pension. Whilst I know she has to pay income tax on anything above her personnel tax allowance of £12570 it would appear that HMRC are calculating PIP as being a factor in the tax free allowance. I thought this was a tax free benefit, or so it said on the .gov website. State pension and PIP combined takes her over the allowance threshold. Surely if PIP is tax free then it shouldn't be part of the equation? Her combined state and private pension take her over the allowance threshold, so she would only pay PAYE on anything over the allowance. Which I get. It's the fact that HMRC are saying that the amount over the allowance is greater as they are factoring in the PIP payment as well as the pensions. 
I'd ring HMRC but last time I did that the call cost £25!
Any advice appreciated. 
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Comments

  • molerat
    molerat Posts: 33,470 Forumite
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    edited 8 November 2023 at 4:58PM
    Are you sure they are deducting the PIP from her tax allowance as often these things are mentioned but not actually used in the calculations.
    What is the breakdown of her tax allowance ?
    Do you / she have access to her on line tax account ?
  • mcnic110
    mcnic110 Posts: 13 Forumite
    Ninth Anniversary 10 Posts Combo Breaker
    this is from December 22 PAYE tax code notice:
    Personal Allowance.   £12570
    Flat Rate Job Expenses £60. (HMRC have been advised to cancel this allowance)
    Less state Pension £8516
    Less Other  Benefits (PIP) £4066
    Total tax free amount £48


    I think we are going to go to our local CAB with all the paperwork that we have to seen if they can make some sense of it all.
  • molerat
    molerat Posts: 33,470 Forumite
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    Looks pretty clear cut what is happening, nothing really to make sense of.  Contacting HMRC is the only way to sort this.  Do you know someone who has inclusive minutes on their phone you could borrow ?  Phoning as soon as they open is usually the best time to get through.  The other option is writing.  Or contacting your MP.
  • mcnic110
    mcnic110 Posts: 13 Forumite
    Ninth Anniversary 10 Posts Combo Breaker
    Thank you, that’s what I thought. Got inclusive minutes on my mobile so we’ll try that way. 
  • xylophone
    xylophone Posts: 45,426 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    https://www.gov.uk/income-tax/taxfree-and-taxable-state-benefits

    PIP is not a taxable benefit.

    Was she in receipt of the private pension in  the tax year 22/23?
  • mcnic110
    mcnic110 Posts: 13 Forumite
    Ninth Anniversary 10 Posts Combo Breaker
    she was yes, but that was listed as a taxable income because there was nothing left in her tax free allowance as a result of HMRC including PIP as a taxable benefit as I highlighted above. 
  • mcnic110 said:
    this is from December 22 PAYE tax code notice:
    Personal Allowance.   £12570
    Flat Rate Job Expenses £60. (HMRC have been advised to cancel this allowance)
    Less state Pension £8516
    Less Other  Benefits (PIP) £4066
    Total tax free amount £48


    I think we are going to go to our local CAB with all the paperwork that we have to seen if they can make some sense of it all.

    DWP wouldn't notify HMRC of PIP as it's of no interest to HMRC.

    So the £4,066 is either something else, possibly a taxable benefit like Carers Allowance (which may no longer be being received) or your MIL had probably mentioned PIP to HMRC and either confused them by mentioning a non taxable benefit or got a trainee!

  • mcnic110
    mcnic110 Posts: 13 Forumite
    Ninth Anniversary 10 Posts Combo Breaker
    She did get carers allowance until 2017 when my FIL died. She was in receipt of PIP from early 2018. There hasn’t been an issue until 20/21. Good point about a possible trainee error as well. I’m going to approach taxvol.org obo my MIL. This needs sorted out and I want as much ammunition as possible before we go to HMRC. 
  • xylophone
    xylophone Posts: 45,426 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Did anything change in 2021/22?  Did your MIL have cause to communicate with HMRC during that period?

    Has your MIL set up a Personal Tax Account?

    https://www.gov.uk/personal-tax-account

    Does the amount stated to be other benefits bear any resemblance to what she receives as a private pension?
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