50% Tax Query on NHS Pension

Aki123

Hi, I wonder if anyone can help?  My 87-year-old mom has a (tiny) NHS pension from a very long time ago.  I've just seen her P60 for this year, and she's being taxed exactly 50% on this.  The only other pension she has is her state pension.  Is that right?  If not, how should I go about challenging it? The total amount for the year is only £1,495.20, but she's being taxed £747.60 on it?

FIREDreamer

Aki123 said:

Hi, I wonder if anyone can help?  My 87-year-old mom has a (tiny) NHS pension from a very long time ago.  I've just seen her P60 for this year, and she's being taxed exactly 50% on this.  The only other pension she has is her state pension.  Is that right?  If not, how should I go about challenging it? The total amount for the year is only £1,495.20, but she's being taxed £747.60 on it?

Is the state pension more than £12,570? Possible if she has any graduated state pension or SERPS or ASP.

dunstonh

Aki123 said:

Hi, I wonder if anyone can help?  My 87-year-old mom has a (tiny) NHS pension from a very long time ago.  I've just seen her P60 for this year, and she's being taxed exactly 50% on this.  The only other pension she has is her state pension.  Is that right?  If not, how should I go about challenging it? The total amount for the year is only £1,495.20, but she's being taxed £747.60 on it?

What is her tax code? (and if you have access to the tax code breakdown, what does that say)

Does she have savings?  if so, was the interest high enough to generate taxation (an increasingly common outcome now that interest rates are higher).

You say the state pension is the only other pension but what about other forms of income?  investments, property etc

Before you challenge it, you need to understand it.

Aki123

Hi FIRED & dunstonh, thanks for the quick responses.
Her tax code is K329
She doesn't have any other income, and is on a basic state pension.
She does (very recently acquired) have some savings, as we sold her house last week, because she needs to go into a care home so we need funds for that.  However, before that she had only about £30k maximum in savings.
I remember mom saying she 'contracted out of SERPS' but I've absolutely no idea what impact that would have had.
Thanks again for your advice.

Hoenir

How much is your mother receiving in state pension? 

Aki123

Hi Hoenir,
I've got her tax code notice for Jan 2024, it says
Personal Allowance £12,570
State Pension £12,570
NHS Pension £4,821 (which is different to the notice from NHS which says £1,495.20)
Total tax-free amount £-4,821
And on this document, her tax code is given as K481
I really don't understand pensions, sorry!

Dazed_and_C0nfused

Aki123 said:

Hi Hoenir,
I've got her tax code notice for Jan 2024, it says
Personal Allowance £12,570
State Pension £12,570
NHS Pension £4,821 (which is different to the notice from NHS which says £1,495.20)
Total tax-free amount £-4,821
And on this document, her tax code is given as K481
I really don't understand pensions, sorry!

You need to be clear about the facts.

How many NHS pensions does she have?

What is her State Pension weekly amount?

Being £12,570/year is a huge coincidence.

Aki123

Sorry - I mis-typed, her state pension is £17,391
She definitely only has the one NHS pension (she just worked as a laundry assistant part-time many years ago)
Mom's pension is paid in monthly - £1237.04
She does also get Attendance Allowance of £407 per month, which I've just remembered.

Hoenir

Aki123 said:

Sorry - I mis-typed, her state pension is £17,391

This is paid gross so tax will be deducted from other income sources, i.e. the NHS pension. 

Open a personal tax account. The information can then be viewed online. 

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

p00hsticks

Aki123 said:

Mom's pension is paid in monthly - £1237.04

If you are referring to her State Pension, then it will be paid four-weekly, rather than monthly, so 13 payments a year. Although that would only come to £16,081.52, not the £17,391 you mention earlier.
Regardless of that, either amount would be right at the top of what it was possible to get under the pre-2016 pension rules (for comparison the pre-2016 basic state pension is currently £169.50 a week, and your mum appears to be getting in excess of £300). This is presumably due to your mum (and/or your dad if she is widowed and inherited some state pension from him) being contracted in for much of their working lives.

State pension is taxable but tax is not deducted at source. As your mother is receiving more that her tax allowance of £12,570 a year then she will need to pay some tax. HMRCs first port of call to collect this tax is by deducting it from other taxable sources of income such as private pensions, which is what your mother is finding.

However I believe the rules are that the maximum pension companies are allowed to deduct in tax is 50% of the gross. This is what seems to be happening here, and may mean that there is further tax that your mother will be asked to apy - probably in a letter sent to her by HMRC aftrer the end of the tax year.

Aki123

Hoenir said:

Aki123 said:

Sorry - I mis-typed, her state pension is £17,391

This is paid gross so tax will be deducted from other income sources, i.e. the NHS pension. 

Open a personal tax account. The information can then be viewed online. 

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

Thank you, I'll do that!