Confusion about tax code

JazF

Hi everyone, hope you can shed some light on my tax code. I took my pension from my employer at age 55 in April 2020 and left employment in Nov 21. I have just checked my tax code and for the current tax year it has been reduced to 641n. Surely it should be the standard personal allowance code? Confused. 

Dazed_and_C0nfused

JazF said:

Hi everyone, hope you can shed some light on my tax code. I took my pension from my employer at age 55 in April 2020 and left employment in Nov 21. I have just checked my tax code and for the current tax year it has been reduced to 641n. Surely it should be the standard personal allowance code? Confused. 

N signifies you have applied for Marriage Allowances so have a Personal Allowance of £11,310.

Who is going to be using this tax code and how much income do you expect to receive from them in the current tax year?

JazF

My husband has used part of my allowance for a number of years as I have always worked part time so significantly under the personal allowance tax limit, so yes that accounts for the N.

But surely my code should be 113N? I currently do not work, my small monthly pension being my only income. This is approx £2900 per year. 

DE_612183

Have you checked your personal account online and the estimates for next year?

What could happen is that the combination of your salary and pension has taken you out of the basic tax bracket - and this can't be collected in the normal way - also the MA doesn't apply if you were in the next tax bracket.

Without the full detail of each of your incomes it's hard to say - best bet is take a half hour out and phone HMRC.

molerat

Your on line tax account will clearly show how they have arrived at the code, what deductions and additions from the standard £12570 have been made. How much savings interest and dividends do you receive in a year, that is often the main deduction if there is spare allowance from estimated income.  As long as the code is above the income for that particular source then there is no real cause for concern.

JazF

Thanks for the replies. I think I have sussed it, they are taking into account untaxed interest on savings. 

However that will have reduced for the current year ( not as much in savings now). I am presuming this will be reflected in a future assessment. 

Dazed_and_C0nfused

JazF said:

Thanks for the replies. I think I have sussed it, they are taking into account untaxed interest on savings. 

However that will have reduced for the current year ( not as much in savings now). I am presuming this will be reflected in a future assessment. 

If your pension is £2,900 and your tax code is 641N then you won't be paying any tax on your pension.

What is your particular concern?

JazF

No concern @Dazed_and_confused.
Just trying to work out why it had dropped so much. 

Never paid much attention to my tax account, worked with same employer for 36 years, so was confused when I logged on.

Dazed_and_C0nfused

JazF said:

No concern @Dazed_and_confused.
Just trying to work out why it had dropped so much. 

Never paid much attention to my tax account, worked with same employer for 36 years, so was confused when I logged on.

As you have spare Personal Allowances then untaxed interest would use those.

If something changed and you expected your pension to be more than £6,419/year then you just need to update your expected pension amount on your Personal Tax Account and that would prompt a new tax code calculation.

For low earners the untaxed interest just uses unused allowances, so if there aren't any (or less are unused) the tax code would change to reflect that.