Pensioner Incomes being Taxed at 50% - K Code Issues

[Deleted User]

[Deleted User] said:

Dazed_and_C0nfused said:

[Deleted User] said:

Phoenix72 said:

[Deleted User] said:

sheramber said:

[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%.

The entire income is relevant. Over the entire income the tax is charged at 20%, regardless of how much is deducted  from an individual source.

Hopefully, this clarifies it for you.

I agree, however because such individuals are not enjoying a self-assessment filing there is no way for the taxman to know for sure what the entire income is. A letter to the taxman explaining that the pensions are the entire income will see them filling in a self-assessment form asking for amounts of savings interest. Keep a hold of savings P60 letters for the eventuality.

The lock on personal allowances whilst the triple pension lock is in play increases state pension and erodes the amount of free personal allowance available for the Marriage Allowance transfer.

This is further exacerbated by additions to the state pension such as pre 97 contracted out allowances, post 97 allowances and graduated allowances. The later version of the state pension with its improved payout again reduces the free personal allowance for transfer.

"Savings P60 letter" - is that something else you have made up?

ps HMRC don't need to ask for savings interest - they already know.

Not when the amount of savings fall within the tax free limit. They only know of the interest that is in excess of the limit.

What a load of nonsense.

Indeed- From HMRC 

Banks and other financial institutions report all interest to HM Revenue & Customs (HMRC) at the end of each tax year.

Stay on topic, Pensioners and K-Codes.

[Deleted User]

Phoenix72 said:

[Deleted User] said:

Phoenix72 said:

[Deleted User] said:

sheramber said:

[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%.

The entire income is relevant. Over the entire income the tax is charged at 20%, regardless of how much is deducted  from an individual source.

Hopefully, this clarifies it for you.

I agree, however because such individuals are not enjoying a self-assessment filing there is no way for the taxman to know for sure what the entire income is. A letter to the taxman explaining that the pensions are the entire income will see them filling in a self-assessment form asking for amounts of savings interest. Keep a hold of savings P60 letters for the eventuality.

The lock on personal allowances whilst the triple pension lock is in play increases state pension and erodes the amount of free personal allowance available for the Marriage Allowance transfer.

This is further exacerbated by additions to the state pension such as pre 97 contracted out allowances, post 97 allowances and graduated allowances. The later version of the state pension with its improved payout again reduces the free personal allowance for transfer.

"Savings P60 letter" - is that something else you have made up?

ps HMRC don't need to ask for savings interest - they already know.

Not when the amount of savings fall within the tax free limit. They only know of the interest that is in excess of the limit.

That, I can assure you, is total BS

And to clarify, there is no 'tax free limit'

Stay on topic.

Dazed_and_C0nfused

[Deleted User] said:

Phoenix72 said:

[Deleted User] said:

Phoenix72 said:

[Deleted User] said:

sheramber said:

[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%.

The entire income is relevant. Over the entire income the tax is charged at 20%, regardless of how much is deducted  from an individual source.

Hopefully, this clarifies it for you.

I agree, however because such individuals are not enjoying a self-assessment filing there is no way for the taxman to know for sure what the entire income is. A letter to the taxman explaining that the pensions are the entire income will see them filling in a self-assessment form asking for amounts of savings interest. Keep a hold of savings P60 letters for the eventuality.

The lock on personal allowances whilst the triple pension lock is in play increases state pension and erodes the amount of free personal allowance available for the Marriage Allowance transfer.

This is further exacerbated by additions to the state pension such as pre 97 contracted out allowances, post 97 allowances and graduated allowances. The later version of the state pension with its improved payout again reduces the free personal allowance for transfer.

"Savings P60 letter" - is that something else you have made up?

ps HMRC don't need to ask for savings interest - they already know.

Not when the amount of savings fall within the tax free limit. They only know of the interest that is in excess of the limit.

That, I can assure you, is total BS

And to clarify, there is no 'tax free limit'

Stay on topic.

It was you who first mentioned interest though.

A letter to the taxman explaining that the pensions are the entire income will see them filling in a self-assessment form asking for amounts of savings interest. Keep a hold of savings P60 letters for the eventuality

Although that has highlighted that your knowledge there is as limited as it is to the rest of how personal tax works.

[Deleted User]

Dazed_and_C0nfused said:

[Deleted User] said:

Phoenix72 said:

[Deleted User] said:

Phoenix72 said:

[Deleted User] said:

sheramber said:

[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%.

The entire income is relevant. Over the entire income the tax is charged at 20%, regardless of how much is deducted  from an individual source.

Hopefully, this clarifies it for you.

I agree, however because such individuals are not enjoying a self-assessment filing there is no way for the taxman to know for sure what the entire income is. A letter to the taxman explaining that the pensions are the entire income will see them filling in a self-assessment form asking for amounts of savings interest. Keep a hold of savings P60 letters for the eventuality.

The lock on personal allowances whilst the triple pension lock is in play increases state pension and erodes the amount of free personal allowance available for the Marriage Allowance transfer.

This is further exacerbated by additions to the state pension such as pre 97 contracted out allowances, post 97 allowances and graduated allowances. The later version of the state pension with its improved payout again reduces the free personal allowance for transfer.

"Savings P60 letter" - is that something else you have made up?

ps HMRC don't need to ask for savings interest - they already know.

Not when the amount of savings fall within the tax free limit. They only know of the interest that is in excess of the limit.

That, I can assure you, is total BS

And to clarify, there is no 'tax free limit'

Stay on topic.

It was you who first mentioned interest though.

A letter to the taxman explaining that the pensions are the entire income will see them filling in a self-assessment form asking for amounts of savings interest. Keep a hold of savings P60 letters for the eventuality

Although that has highlighted that your knowledge there is as limited as it is to the rest of how personal tax works.

Dazed_and_C0nfused said:

[Deleted User] said:

Phoenix72 said:

[Deleted User] said:

Phoenix72 said:

[Deleted User] said:

sheramber said:

[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%.

The entire income is relevant. Over the entire income the tax is charged at 20%, regardless of how much is deducted  from an individual source.

Hopefully, this clarifies it for you.

I agree, however because such individuals are not enjoying a self-assessment filing there is no way for the taxman to know for sure what the entire income is. A letter to the taxman explaining that the pensions are the entire income will see them filling in a self-assessment form asking for amounts of savings interest. Keep a hold of savings P60 letters for the eventuality.

The lock on personal allowances whilst the triple pension lock is in play increases state pension and erodes the amount of free personal allowance available for the Marriage Allowance transfer.

This is further exacerbated by additions to the state pension such as pre 97 contracted out allowances, post 97 allowances and graduated allowances. The later version of the state pension with its improved payout again reduces the free personal allowance for transfer.

"Savings P60 letter" - is that something else you have made up?

ps HMRC don't need to ask for savings interest - they already know.

Not when the amount of savings fall within the tax free limit. They only know of the interest that is in excess of the limit.

That, I can assure you, is total BS

And to clarify, there is no 'tax free limit'

Stay on topic.

It was you who first mentioned interest though.

A letter to the taxman explaining that the pensions are the entire income will see them filling in a self-assessment form asking for amounts of savings interest. Keep a hold of savings P60 letters for the eventuality

Although that has highlighted that your knowledge there is as limited as it is to the rest of how personal tax works.

Yes, it was, HMRC seem to contradict you. When a non-self-assessed tax payer reclaims tax from savings, form R40 must be completed. The issue for the taxman is determining the entire income of the pensioner which will include gross interest paid from savings.

Everybody's knowledge of the tax system is limited that's why people hire the services of tax advisers so your barbed comment is rhetorical.

HMRC requires evidence, you say they have it, but what would it cost them in time and effort to go through millions of records to find what you say they already know. The easy option is to make the claimant do the work by submitting proof of interest paid, after all, HMRC is a business not a charity.

sheramber

Interest is paid without deduction of tax  

[Deleted User]

sheramber said:

Interest is paid without deduction of tax  

Only since 6th April 2016 though - the op may not be that up to date!