Receiving a work pension and returning to direct employment, pension tax implications.

Cheesehead100000

Hello. I retired 2 years ago and receive a monthly works pension ( I have not yet reached the state retirement age). I have returned to full time work, directly employed and my monthly pension is heavily taxed, is it possible to avoid this tax hike on my pension? 

eskbanker

Both your employment earnings and your pension payments are subject to income tax - you could potentially get the codings adjusted to tax one more instead of the other, but if the total tax take is accurate then there's no way of avoiding that.

Albermarle

You have two streams of taxable income, just the same as if you had two jobs. So your tax liability is calculated on your total taxable income in this case.

Sarahspangles

Cheesehead100000 said:

Hello. I retired 2 years ago and receive a monthly works pension ( I have not yet reached the state retirement age). I have returned to full time work, directly employed and my monthly pension is heavily taxed, is it possible to avoid this tax hike on my pension? 

Are you making pension contributions in your new job?

sheramber

You can ask for your personal allowance to set against your pension.

That means you  will be taxed more on your salary.

You will pay the same tax over the year. 

OldScientist

Cheesehead100000 said:

Hello. I retired 2 years ago and receive a monthly works pension ( I have not yet reached the state retirement age). I have returned to full time work, directly employed and my monthly pension is heavily taxed, is it possible to avoid this tax hike on my pension? 

However, you will note that you are not being charged NI on your pension income, while this will be levied on your salary.

As others have said, it is possible to move the tax from pension to salary by placing all your personal allowance on the pension and then having an appropriate tax code (e.g., BR) on your salary - I did this when I did some consultancy work after retiring. I'm not sure whether there are any advantages to opting for one way or the other.

DullGreyGuy

Cheesehead100000 said:

Hello. I retired 2 years ago and receive a monthly works pension ( I have not yet reached the state retirement age). I have returned to full time work, directly employed and my monthly pension is heavily taxed, is it possible to avoid this tax hike on my pension? 

You're taxed on your total income so the net pay is going to be the same until you stop working again. You can choose to pay less tax on the pension and more tax on the wages but net result is the same. 

The way to reduce the tax is to reduce your income so maybe salary sacrifice your income into a new pension fund