State Pension/Private Pension - Paying Tax!

BernieLondon

Good morning all

Next month I will start receiving the full state pension of £884.80 every 4 weeks.. I have already been receiving a small company pension of £296.08 per month for the last year.

For the last 13 years I have been a full time carer for my Wife after she had a devastating stroke so I have not worked for that period.

I have never paid any tax on the company pension as it is only worth just over £3500.00 per year.

With getting a state pension my total yearly income will increase to just over £15055.00. I used the Government Tax Calculator with my tax code of 1254L and I should be paying around £41.00 per month in tax.

So, how do I pay this tax? Is it deducted from either the state or company pension? Will I be getting a bill or demand for payment? 

Any help would be very much appreciated.

[Deleted User]

The tax will be deducted from your company pension. HMRC will inform your company pension administrators and they will adjust your company pension monthly payments.

eastcorkram

Not sure if the figures work out the same, but that won't be your tax code, once the state pension starts paying out. 

mebu60

Any income tax due will be taken out of your company pension. A few weeks after starting your state pension you will be notified of your revised tax code by HMRC as will your company pension payroll people. 

[Deleted User]

Having had a quick look at your figures the tax payable will be about £41 to £42 a month.
Your tax code will be something like 102L.
Your state pension is about £11542 a year. Take this away from your tax allowance of  £12570 and you are left with £1028 a year tax allowance on your company pension.
£3552 a year minus £1028 is £2524
£2524 times 0.2 (20% tax) is £504 a year tax about £42 a month give or take a few pence either way.
Net company pension will be about £254 a month.
Hope this helps.

So annually you will receive 13 x £884.80 a month plus 12x £254.

I have not allowed for your income being below the tax allowance for the 2024/2025 financial year so your tax code will initially be different to the one in my example in your favour lol!

So for this financial year your net company pension payment will remain at £296.08

Dazed_and_C0nfused

BernieLondon said:

Good morning all

Next month I will start receiving the full state pension of £884.80 every 4 weeks.. I have already been receiving a small company pension of £296.08 per month for the last year.

For the last 13 years I have been a full time carer for my Wife after she had a devastating stroke so I have not worked for that period.

I have never paid any tax on the company pension as it is only worth just over £3500.00 per year.

With getting a state pension my total yearly income will increase to just over £15055.00. I used the Government Tax Calculator with my tax code of 1254L and I should be paying around £41.00 per month in tax.

So, how do I pay this tax? Is it deducted from either the state or company pension? Will I be getting a bill or demand for payment? 

Any help would be very much appreciated.

You will get a new tax code shortly after your State Pension starts.

Because you haven't been liable to tax so far in this tax year and still won't be after starting to receive your State Pension you will be given a new code on a cumulative basis meaning you will continue to pay no tax on your company pension from September to 5 April 2025.

In early 2025 you will get a new tax code for 2025-26 with a full years worth of the updated State Pension, say £11,960 if triple lock increases is 4.0%.

That would result in a new tax code of 61L (assuming PA remains frozen) and your company pension payer would deduct about £50/month (a bit more if your company pension has an inflation increase).

Your wife (or you for her) could also look at applying for Marriage Allowance as that is likely to be of no cost to her (she gets a reduced Personal Allowance of £11,310) and you save £21/month so only paying ~£30/month instead of ~£50.

All the above assumes you aren't receiving taxable Carer's Allowance.

[Deleted User]

When will your wife be receiving her state pension? Have your checked what her state pension will be or how much she is already receiving? Does she also have a company pension?

BernieLondon

[Deleted User] said:

When will your wife be receiving her state pension? Have your checked what her state pension will be or how much she is already receiving? Does she also have a company pension?

Thank you all for the replies.

My Wife started receiving her state pension July 2023 in the sum of £556.16 every 4 weeks. She does not have a company pension.