Taxing of State Pension

Raudi7

KevinG said:

Not sure whether this is the right forum but I had to get this off my chest. I did my SA Tax Return online and reported the amount of State Pension I had received during the tax year (my pension started during 2023/24). I knew I would owe tax due to bank interest and when I submitted the return the figure owing agreed exactly with what I expected. But the amount they showed I owed was £105 higher and when I received the calculation in the post, sure enough the pension figure (including my company pension) was £525 higher. After a long conversation on the phone it was established that the discrepancy was in the State Pension part and the reason for this is that they take the weekly amount and multiply it by the number of weeks I was entitled to it during the year (21, as it happens) and use that figure, irrespective of whether I had actually received the money during the tax year. (They actually rounded up the number of pounds, which they shouldn't do, but that's only cost me 25p.) This is madness! Surely it's far simpler to use the actual payments made. This money is now lost forever as in future years I will be taxed on 52 or 53 weeks pension, irrespective of what I receive and declare on the Tax Return. Stupid system.

Until recently I had assumed that the figure used by HMRC in my annual Notice of Coding was correct - but it is not.

Dept of Employment tell HMRC the next year's ANNUAL State Pension derived from the WEEKLY amount payable for the following tax year (This is usually set in September) - i.e. 52 x weekly amount = Annual Payment and this is paid every four weeks, so 13 payments from April - the following tax year.
However, payments are made a month in arrears - thus my March payment is received in April and the new rate applies from May onwards. 
Stick with me!
If the April payment arrives in the new tax year (after 5th April) the annual amount received for tax purposes is : - 1 x old rate + 12 x new rate :- NOT 13 x new rate as advised to HMRC.

I have explained this to HMRC but they tell me that they work on the figure provided by Dept of Employment even though I can provide them with evidence that this figure is wrong! Bottom line - I'm just £20/year down but its very aggravating when HMRC ask you to correct errors and neither Government Department cares. 

I have raised the issue with Dept of Employment and it has been noted - but will it change anything - I doubt it. An annual statement from DoE relating to payments made in the tax year - like a P60 - would be very helpful.

TheSpectator

Raudi7 said:

KevinG said:

Not sure whether this is the right forum but I had to get this off my chest. I did my SA Tax Return online and reported the amount of State Pension I had received during the tax year (my pension started during 2023/24). I knew I would owe tax due to bank interest and when I submitted the return the figure owing agreed exactly with what I expected. But the amount they showed I owed was £105 higher and when I received the calculation in the post, sure enough the pension figure (including my company pension) was £525 higher. After a long conversation on the phone it was established that the discrepancy was in the State Pension part and the reason for this is that they take the weekly amount and multiply it by the number of weeks I was entitled to it during the year (21, as it happens) and use that figure, irrespective of whether I had actually received the money during the tax year. (They actually rounded up the number of pounds, which they shouldn't do, but that's only cost me 25p.) This is madness! Surely it's far simpler to use the actual payments made. This money is now lost forever as in future years I will be taxed on 52 or 53 weeks pension, irrespective of what I receive and declare on the Tax Return. Stupid system.

Until recently I had assumed that the figure used by HMRC in my annual Notice of Coding was correct - but it is not.

Dept of Employment tell HMRC the next year's ANNUAL State Pension derived from the WEEKLY amount payable for the following tax year (This is usually set in September) - i.e. 52 x weekly amount = Annual Payment and this is paid every four weeks, so 13 payments from April - the following tax year.
However, payments are made a month in arrears - thus my March payment is received in April and the new rate applies from May onwards. 
Stick with me!
If the April payment arrives in the new tax year (after 5th April) the annual amount received for tax purposes is : - 1 x old rate + 12 x new rate :- NOT 13 x new rate as advised to HMRC.

I have explained this to HMRC but they tell me that they work on the figure provided by Dept of Employment even though I can provide them with evidence that this figure is wrong! Bottom line - I'm just £20/year down but its very aggravating when HMRC ask you to correct errors and neither Government Department cares. 

I have raised the issue with Dept of Employment and it has been noted - but will it change anything - I doubt it. An annual statement from DoE relating to payments made in the tax year - like a P60 - would be very helpful.

And who are the Department of Employment and what relevance to they have to state pension.

You are also wrong btw.....suggest you go back and read this thread in full.

molerat

As has been pointed out may times in this thread alone the state pension is not taxed on the amount received but the amount due in the tax year as laid down by acts of parliament so it is going to take a lot more than your unhappiness to change anything.  https://www.legislation.gov.uk/ukpga/2003/1/section/578

Dazed_and_C0nfused

Raudi7 said:

KevinG said:

Not sure whether this is the right forum but I had to get this off my chest. I did my SA Tax Return online and reported the amount of State Pension I had received during the tax year (my pension started during 2023/24). I knew I would owe tax due to bank interest and when I submitted the return the figure owing agreed exactly with what I expected. But the amount they showed I owed was £105 higher and when I received the calculation in the post, sure enough the pension figure (including my company pension) was £525 higher. After a long conversation on the phone it was established that the discrepancy was in the State Pension part and the reason for this is that they take the weekly amount and multiply it by the number of weeks I was entitled to it during the year (21, as it happens) and use that figure, irrespective of whether I had actually received the money during the tax year. (They actually rounded up the number of pounds, which they shouldn't do, but that's only cost me 25p.) This is madness! Surely it's far simpler to use the actual payments made. This money is now lost forever as in future years I will be taxed on 52 or 53 weeks pension, irrespective of what I receive and declare on the Tax Return. Stupid system.

Until recently I had assumed that the figure used by HMRC in my annual Notice of Coding was correct - but it is not.

Dept of Employment tell HMRC the next year's ANNUAL State Pension derived from the WEEKLY amount payable for the following tax year (This is usually set in September) - i.e. 52 x weekly amount = Annual Payment and this is paid every four weeks, so 13 payments from April - the following tax year.
However, payments are made a month in arrears - thus my March payment is received in April and the new rate applies from May onwards. 
Stick with me!
If the April payment arrives in the new tax year (after 5th April) the annual amount received for tax purposes is : - 1 x old rate + 12 x new rate :- NOT 13 x new rate as advised to HMRC.

I have explained this to HMRC but they tell me that they work on the figure provided by Dept of Employment even though I can provide them with evidence that this figure is wrong! Bottom line - I'm just £20/year down but its very aggravating when HMRC ask you to correct errors and neither Government Department cares. 

I have raised the issue with Dept of Employment and it has been noted - but will it change anything - I doubt it. An annual statement from DoE relating to payments made in the tax year - like a P60 - would be very helpful.

The only thing that seems wrong here is if HMRC tried to palm you off into the Department of Employment (aka DWP 😀).

They should have explained how the State Pension is taxed.  And maybe pointed you to the relevant legislation.

At which point you would presumably have seen the error of your ways and left well alone.

michael4343

https://forums.moneysavingexpert.com/discussion/6559929/taxing-of-state-pension

			As a result, HMRC calculates your tax code based on one of two metrics. The guidance states:
							In years when April 6 falls on a Tuesday, Wednesday, Thursday or Friday, the Uprating Service calculates the coding deduction at 1 week at the old rate and 51 weeks at the new rate
					In years when April 6 falls on a Saturday, Sunday or Monday, the Uprating Service calculates the coding deduction at 52 times the new rate.

Pollycat

Original post dates back to October 2024.

LHW99

@michael4343 - think the formatting went a bit AWOL on your last post 😕