Pensioner Incomes being Taxed at 50% - K Code Issues

[Deleted User]

molerat said:

They should also have received their P60's from their pension provider(s)

Providers have until the end of May to supply the P60

The evidential fact being seen is that some low-income pensioners are paying tax at both 50% .....

There is no 50% tax rate.  Some may be paying 50% of a particular pension in tax but that will be because it is tax due from elsewhere.

K codes are used where other untaxed income exceeds the personal allowance and should, in most cases, result in the correct amount of due tax being collected. The 50% limit may in fact result in too little tax being collected. What other method of collecting the tax due do you suggest ? I suspect there would be mass panic when a simple assessment dropped on the doormat asking for £££££ by January.

Just goes full circle back to my previous post

It is amazing how many people have a poor understanding of a) the tax system and, even worse, b) basic maths.

You have to consider that you are one of those you demeen because you are trolling with nothing of substance to contribute. I have seen the evidence of pensioner P2 and P60 where the allowance has gone negative causing a K code to be assigned something that causes the income to be taxed at 50%. K codes are usually associated with a benefit-in-kind of some sort so the pension is being treated as such by HMRC. What should happen is that the code becomes BR however if HMRC can tax at 50% rather than 20% they will.

Dazed_and_C0nfused

[Deleted User] said:

molerat said:

They should also have received their P60's from their pension provider(s)

Providers have until the end of May to supply the P60

The evidential fact being seen is that some low-income pensioners are paying tax at both 50% .....

There is no 50% tax rate.  Some may be paying 50% of a particular pension in tax but that will be because it is tax due from elsewhere.

K codes are used where other untaxed income exceeds the personal allowance and should, in most cases, result in the correct amount of due tax being collected. The 50% limit may in fact result in too little tax being collected. What other method of collecting the tax due do you suggest ? I suspect there would be mass panic when a simple assessment dropped on the doormat asking for £££££ by January.

Just goes full circle back to my previous post

It is amazing how many people have a poor understanding of a) the tax system and, even worse, b) basic maths.

You have to consider that you are one of those you demeen because you are trolling with nothing of substance to contribute. I have seen the evidence of pensioner P2 and P60 where the allowance has gone negative causing a K code to be assigned something that causes the income to be taxed at 50%. K codes are usually associated with a benefit-in-kind of some sort so the pension is being treated as such by HMRC. What should happen is that the code becomes BR however if HMRC can tax at 50% rather than 20% they will.

That is where you are mistaken.

It causes a particular source of income to have an effective tax rate of 50% (the maximum an employer or pension payer is allowed to deduct).

For a typical pensioner to have a K code in the first place means they have a substantial amount of taxable income which is being paid in full without any tax being deducted.  Usually the State Pension.

So they may be having 50% deducted from one pension but they are having 0% deducted at source from a much larger source of income.

I do agree with your final comment though.  HMRC's aim, under PAYE, is to try and ensure the correct amount of tax is deducted during the year and if that means a K code will result in 50% being deducted and that is closer to the correct amount compared to using a BR code then that is what they will do.

One thing they don't seem to have mastered is where someone has two or more, relatively, small PAYE pensions and a large State Pension.

They can issue a K code so 50% is deducted at the "main" PAYE source but if the pensioner isn't liable to higher rate tax they would only use code BR at the other PAYE pension even if that meant insufficient tax was deducted.  Tax code D0 or D1 would sometimes achieve a better result but they don't seem to ever use D0 or D1 unless someone is actually due to pay higher rate or additional rate tax.

Which means those people will have extra to pay after the end of the tax year when in theory more tax could be deducted during the year.

molerat

[Deleted User] said:

You have to consider that you are one of those you demeen because you are trolling with nothing of substance to contribute. I have seen the evidence of pensioner P2 and P60 where the allowance has gone negative causing a K code to be assigned something that causes the income to be taxed at 50%. K codes are usually associated with a benefit-in-kind of some sort so the pension is being treated as such by HMRC. What should happen is that the code becomes BR however if HMRC can tax at 50% rather than 20% they will.

A BR code will cause an underpayment of tax in that situation leading to an even greater K code needed next year or a simple assessment "bill" to be paid in a lump sum, neither being good outcomes.  HMRC are not treating it as a BIK, they are purely collecting unpaid tax from other income sources. They are not deducting tax at 50% but taking 50% of the gross payment in tax, likely at a rate of 20%.

Bookworm105

[Deleted User] said:

 I have seen the evidence of pensioner P2 and P60 where the allowance has gone negative causing a K code to be assigned something that causes the income to be taxed at 50%. .

then please show the TOTAL income from ALL SOURCES if you want to stick with your claim that the tax rate is 50% overall.
you seem to be misunderstanding that the state pension has had zero tax deducted from it at source yet forms part of total taxable income

sheramber

[Deleted User] said:

molerat said:

They should also have received their P60's from their pension provider(s)

Providers have until the end of May to supply the P60

The evidential fact being seen is that some low-income pensioners are paying tax at both 50% .....

There is no 50% tax rate.  Some may be paying 50% of a particular pension in tax but that will be because it is tax due from elsewhere.

K codes are used where other untaxed income exceeds the personal allowance and should, in most cases, result in the correct amount of due tax being collected. The 50% limit may in fact result in too little tax being collected. What other method of collecting the tax due do you suggest ? I suspect there would be mass panic when a simple assessment dropped on the doormat asking for £££££ by January.

Just goes full circle back to my previous post

It is amazing how many people have a poor understanding of a) the tax system and, even worse, b) basic maths.

You have to consider that you are one of those you demeen because you are trolling with nothing of substance to contribute. I have seen the evidence of pensioner P2 and P60 where the allowance has gone negative causing a K code to be assigned something that causes the income to be taxed at 50%. K codes are usually associated with a benefit-in-kind of some sort so the pension is being treated as such by HMRC. What should happen is that the code becomes BR however if HMRC can tax at 50% rather than 20% they will.

What about the income that has not been taxed- i.e. state pension.  This income is taxable but cannot be taxed at source so thte tax has to come from elsewhere.

How do youn propose the tax due on the state penion is charged?

[Deleted User]

molerat said:

[Deleted User] said:

You have to consider that you are one of those you demeen because you are trolling with nothing of substance to contribute. I have seen the evidence of pensioner P2 and P60 where the allowance has gone negative causing a K code to be assigned something that causes the income to be taxed at 50%. K codes are usually associated with a benefit-in-kind of some sort so the pension is being treated as such by HMRC. What should happen is that the code becomes BR however if HMRC can tax at 50% rather than 20% they will.

A BR code will cause an underpayment of tax in that situation leading to an even greater K code needed next year or a simple assessment "bill" to be paid in a lump sum, neither being good outcomes.  HMRC are not treating it as a BIK, they are purely collecting unpaid tax from other income sources. They are not deducting tax at 50% but taking 50% of the gross payment in tax, likely at a rate of 20%.

Let me ask you a question. Personally, does your entire untaxed income from all sources fall below £12,570. Now let me pre-empt you, the answer is "No!". The reason why the Marriage Allowance exists is that many thousands if not millions of people have an entire income that falls below the standard Personal Allowance of £12,570 per year. The upper 20% tax threshold is £37,700. Ergo, income falling between £12,750 and £37,700 is taxable at 20%.

Does that clarify things for you?

[Deleted User]

Bookworm105 said:

[Deleted User] said:

 I have seen the evidence of pensioner P2 and P60 where the allowance has gone negative causing a K code to be assigned something that causes the income to be taxed at 50%. .

then please show the TOTAL income from ALL SOURCES if you want to stick with your claim that the tax rate is 50% overall.
you seem to be misunderstanding that the state pension has had zero tax deducted from it at source yet forms part of total taxable income

The reason why the Marriage Allowance exists is that many thousands if not millions of people have an entire income that falls below the standard Personal Allowance of £12,570 per year. The upper 20% tax threshold is £37,700. Ergo, income falling between £12,750 and £37,700 is taxable at 20%.

[Deleted User]

sheramber said:

[Deleted User] said:

molerat said:

They should also have received their P60's from their pension provider(s)

Providers have until the end of May to supply the P60

The evidential fact being seen is that some low-income pensioners are paying tax at both 50% .....

There is no 50% tax rate.  Some may be paying 50% of a particular pension in tax but that will be because it is tax due from elsewhere.

K codes are used where other untaxed income exceeds the personal allowance and should, in most cases, result in the correct amount of due tax being collected. The 50% limit may in fact result in too little tax being collected. What other method of collecting the tax due do you suggest ? I suspect there would be mass panic when a simple assessment dropped on the doormat asking for £££££ by January.

Just goes full circle back to my previous post

It is amazing how many people have a poor understanding of a) the tax system and, even worse, b) basic maths.

You have to consider that you are one of those you demeen because you are trolling with nothing of substance to contribute. I have seen the evidence of pensioner P2 and P60 where the allowance has gone negative causing a K code to be assigned something that causes the income to be taxed at 50%. K codes are usually associated with a benefit-in-kind of some sort so the pension is being treated as such by HMRC. What should happen is that the code becomes BR however if HMRC can tax at 50% rather than 20% they will.

What about the income that has not been taxed- i.e. state pension.  This income is taxable but cannot be taxed at source so thte tax has to come from elsewhere.

How do youn propose the tax due on the state penion is charged?

The reason why the Marriage Allowance exists is that many thousands if not millions of people have an entire income that falls below the standard Personal Allowance of £12,570 per year. The upper 20% tax threshold is £37,700. Ergo, income falling between £12,750 and £37,700 is taxable at 20%.

[Deleted User]

[Deleted User] said:

Bookworm105 said:

[Deleted User] said:

 I have seen the evidence of pensioner P2 and P60 where the allowance has gone negative causing a K code to be assigned something that causes the income to be taxed at 50%. .

then please show the TOTAL income from ALL SOURCES if you want to stick with your claim that the tax rate is 50% overall.
you seem to be misunderstanding that the state pension has had zero tax deducted from it at source yet forms part of total taxable income

The reason why the Marriage Allowance exists is that many thousands if not millions of people have an entire income that falls below the standard Personal Allowance of £12,570 per year. The upper 20% tax threshold is £37,700. Ergo, income falling between £12,750 and £37,700 is taxable at 20%.

No - income falling between 12570 and 50270 is taxable at 20%. 

Hopefully this clarifies matters for you!

Dazed_and_C0nfused

[Deleted User] said:

sheramber said:

[Deleted User] said:

molerat said:

They should also have received their P60's from their pension provider(s)

Providers have until the end of May to supply the P60

The evidential fact being seen is that some low-income pensioners are paying tax at both 50% .....

There is no 50% tax rate.  Some may be paying 50% of a particular pension in tax but that will be because it is tax due from elsewhere.

K codes are used where other untaxed income exceeds the personal allowance and should, in most cases, result in the correct amount of due tax being collected. The 50% limit may in fact result in too little tax being collected. What other method of collecting the tax due do you suggest ? I suspect there would be mass panic when a simple assessment dropped on the doormat asking for £££££ by January.

Just goes full circle back to my previous post

It is amazing how many people have a poor understanding of a) the tax system and, even worse, b) basic maths.

You have to consider that you are one of those you demeen because you are trolling with nothing of substance to contribute. I have seen the evidence of pensioner P2 and P60 where the allowance has gone negative causing a K code to be assigned something that causes the income to be taxed at 50%. K codes are usually associated with a benefit-in-kind of some sort so the pension is being treated as such by HMRC. What should happen is that the code becomes BR however if HMRC can tax at 50% rather than 20% they will.

What about the income that has not been taxed- i.e. state pension.  This income is taxable but cannot be taxed at source so thte tax has to come from elsewhere.

How do youn propose the tax due on the state penion is charged?

The reason why the Marriage Allowance exists is that many thousands if not millions of people have an entire income that falls below the standard Personal Allowance of £12,570 per year. The upper 20% tax threshold is £37,700. Ergo, income falling between £12,750 and £37,700 is taxable at 20%.

Notwithstanding the fact that, as @[Deleted User] has pointed out, it's between £12570 and £50,270 not £12,750 and £37,700 this makes no difference as far as Marriage Allowance is concerned.

A K code is simply a mechanism to try and collect the correct tax during the year, it in no way changes the rates of tax someone is actually liable to when the final position is calculated after the end of each tax year.

But you do seem to find that concept tricky to understand.