Retired with tax code of SK546?

OldManGav

Hi all, my first post on this forum, hope I do it right, sorry if this has been answered before I did a search but couldn't find anything. 

In the past I would normally ring HMRC, but have had strokes and struggle to speak.  
I have had a letter about my tax code for 2024/25 and am trying to work out if I need to pay taxes for the year.  

The code is: SK546 - I get that S = Scotland, but the K confuses me.

The last line especially on the letter "This totals your tax-free amount: -£5470" - does that mean I owe £5,470 or that I am £5,470 below the tax threshold?  

Cheers,
OldManGav. 

Dazed_and_C0nfused

It means your employer or pension payer will add £455.75 to your earnings/pension each month before they calculate the tax due.

They don't pay you the £455.75 it's just used as part of calculating the tax due.

£455.75 x 12 = £5,469

Do the entries in the tax code look correct?

OldManGav

Thanks, everything on the letter looks correct.  What I get is a full state pension + a private annuity. 

Haven't worked for over 10 years, my partner recently passed away and got this new Tax Code.  I gather that means the annuity provider adds the extra and I pay taxes? 

MetaPhysical

OldManGav said:

Hi all, my first post on this forum, hope I do it right, sorry if this has been answered before I did a search but couldn't find anything. 

In the past I would normally ring HMRC, but have had strokes and struggle to speak.  
I have had a letter about my tax code for 2024/25 and am trying to work out if I need to pay taxes for the year.  

The code is: SK546 - I get that S = Scotland, but the K confuses me.

The last line especially on the letter "This totals your tax-free amount: -£5470" - does that mean I owe £5,470 or that I am £5,470 below the tax threshold?  

Cheers,
OldManGav. 

I hope you start to feel better and your recovery from your stroke goes well.

Marcon

OldManGav said:

Thanks, everything on the letter looks correct.  What I get is a full state pension + a private annuity. 

Haven't worked for over 10 years, my partner recently passed away and got this new Tax Code.  I gather that means the annuity provider adds the extra and I pay taxes? 

Do you have a personal tax account? If not, it could be useful: https://www.gov.uk/personal-tax-account

In the meantime, this might help:

K codes are different from all other codes, in that they tell the employer to use a negative tax free amount. If your code is adjusted to take account of other income, taxable benefits in kind or amounts owing to HMRC,  but you do not have enough tax free personal allowance to cover all these adjustments, then you will be issued with a K code.

Where other codes show an amount of tax free pay, so the higher the number part of the code, the more tax free pay you get;  K codes show an additional taxable amount added to your income. This means that the higher the number part of the K code, the more tax will you pay. It is essential to check K codes individually as they may be the result of a number of adjustments, and there is no standard answer.

Unlike the other codes (where the letter is at the end of the code), the ‘K’ in the K code is placed in front of the numbers.  This helps the employer easily identify this special type of code. The amount of tax deducted using a K code should never exceed 50% of your gross pay for that payday. This rule also applies to other tax codes, but is most likely to apply with K codes. Source: https://taxaid.org.uk/guides/information/issues-for-employees/employee/what-your-paye-code-means-continued

eastcorkram

@Marcon

If the amount of tax due , is more than 50% of whatever you're being paid (let's say a DB pension), then how is the balance collected? Would you just get sent a tax bill?

Marcon

eastcorkram said:

@Marcon

If the amount of tax due , is more than 50% of whatever you're being paid (let's say a DB pension), then how is the balance collected? Would you just get sent a tax bill?

As you'd expect, there isn't a nice simple 'yes that's' right...' answer!

See https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye11095

eastcorkram

Marcon said:

eastcorkram said:

@Marcon

If the amount of tax due , is more than 50% of whatever you're being paid (let's say a DB pension), then how is the balance collected? Would you just get sent a tax bill?

As you'd expect, there isn't a nice simple 'yes that's' right...' answer!

See https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye11095

Wow. Thanks for that (I think !)

I'll have over 20k in untaxed state pension(s). Then there's a DB that will be between 4 and 5k . Then there is a SIPP which I was going to draw, also at about 4 or 5k a year. 

The tax side of it will be interesting. 

Dazed_and_C0nfused

eastcorkram said:

Marcon said:

eastcorkram said:

@Marcon

If the amount of tax due , is more than 50% of whatever you're being paid (let's say a DB pension), then how is the balance collected? Would you just get sent a tax bill?

As you'd expect, there isn't a nice simple 'yes that's' right...' answer!

See https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye11095

Wow. Thanks for that (I think !)

I'll have over 20k in untaxed state pension(s). Then there's a DB that will be between 4 and 5k . Then there is a SIPP which I was going to draw, also at about 4 or 5k a year. 

The tax side of it will be interesting. 

Not sure how you can have more than one State Pension 🤔

But if you did have State Pension of say £21k and no extra tax code allowances or deductions then you would have a tax code of K842 with whatever HMRC view as your "main" pension (not necessarily the largest in monetary terms) and BR code at the other one.

Say each pension was paying £4,500 then you would pay 50% on the main one and 20% on the second one.

After the end of the tax year HMRC would send you a Simple Assessment calculation and you would have to pay the remaining tax due (~£335 in the above example) by 31 January after the end of the tax year.

eastcorkram

Dazed_and_C0nfused said:

eastcorkram said:

Marcon said:

eastcorkram said:

@Marcon

If the amount of tax due , is more than 50% of whatever you're being paid (let's say a DB pension), then how is the balance collected? Would you just get sent a tax bill?

As you'd expect, there isn't a nice simple 'yes that's' right...' answer!

See https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye11095

Wow. Thanks for that (I think !)

I'll have over 20k in untaxed state pension(s). Then there's a DB that will be between 4 and 5k . Then there is a SIPP which I was going to draw, also at about 4 or 5k a year. 

The tax side of it will be interesting. 

Not sure how you can have more than one State Pension 🤔

But if you did have State Pension of say £21k and no extra tax code allowances or deductions then you would have a tax code of K842 with whatever HMRC view as your "main" pension (not necessarily the largest in monetary terms) and BR code at the other one.

Say each pension was paying £4,500 then you would pay 50% on the main one and 20% on the second one.

After the end of the tax year HMRC would send you a Simple Assessment calculation and you would have to pay the remaining tax due (~£335 in the above example) by 31 January after the end of the tax year.

State pensions from two countries.

Thanks for the explanation. Would there still be 25% of each SIPP withdrawal tax free? Or would it all be taxed at 20%…?

Dazed_and_C0nfused

eastcorkram said:

Dazed_and_C0nfused said:

eastcorkram said:

Marcon said:

eastcorkram said:

@Marcon

If the amount of tax due , is more than 50% of whatever you're being paid (let's say a DB pension), then how is the balance collected? Would you just get sent a tax bill?

As you'd expect, there isn't a nice simple 'yes that's' right...' answer!

See https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye11095

Wow. Thanks for that (I think !)

I'll have over 20k in untaxed state pension(s). Then there's a DB that will be between 4 and 5k . Then there is a SIPP which I was going to draw, also at about 4 or 5k a year. 

The tax side of it will be interesting. 

Not sure how you can have more than one State Pension 🤔

But if you did have State Pension of say £21k and no extra tax code allowances or deductions then you would have a tax code of K842 with whatever HMRC view as your "main" pension (not necessarily the largest in monetary terms) and BR code at the other one.

Say each pension was paying £4,500 then you would pay 50% on the main one and 20% on the second one.

After the end of the tax year HMRC would send you a Simple Assessment calculation and you would have to pay the remaining tax due (~£335 in the above example) by 31 January after the end of the tax year.

State pensions from two countries.

Thanks for the explanation. Would there still be 25% of each SIPP withdrawal tax free? Or would it all be taxed at 20%…?

No reason not to take the TFLS.

If you have significant foreign income HMRC are quite likely to prefer you to complete a tax return.

Which has the distinct advantage of meaning you could pay less under PAYE and a larger payment direct to HMRC several months after the end of the tax year.