Understanding tax code re: pension

ceewash

I have recently started receiving my state pension and have received new tax code of 898L. My other income is from a teacher's pension of about £8000. These are my only incomes. I don't understand why this code is 898L. I thought everyone could earn £12570 before tax so the code should be 1257L. 

Ayr_Rage

The state pension is paid gross so any tax due is recovered from your other income.

What, exactly, are your annual state and other pension amounts?

ceewash

I understand the tax is taken from my teacher's pension but don't understand the tax code.
State pension is £9012 and Teacher's pension £8241.

[Deleted User]

ceewash said:

I understand the tax is taken from my teacher's pension but don't understand the tax code.
State pension is £9012 and Teacher's pension £8241.

It could well be, because you still won’t pay tax on your teachers pension THIS TAX YEAR that the amount of state pension that you will receive from commencement to 5th April has been deducted from your personal allowance. 

For example, did you start receiving your state pension mid-November 2024, receiving c£3585 up to 5th April?

molerat

The state pension is taxable income but paid gross.  That amount is deducted from your tax free amount, the remaining tax free amount is then set against your other income.

As an example. £12570 personal allowance, £10000 state pension, £10000 other pension. £20000 - £12570 = £7430 taxable.

Your £10000 state pension is paid gross and your tax allowance is reduced to £2570 and set against your £10000 other pension.  £10000 - £2570 = £7430 taxed.

Is that £9012 a full year pension ?  If so have you not looked at the possibility of increasing it ?

[Deleted User]

molerat said:

I assume the code is actually 898LX ? The tax code will likely not make sense as they will have back calculated how much tax they need to collect from the information they hold and set a code that will do that.

Normally, Yes. But the op won’t be affected by a cumulative code as no tax will be payable on the teachers pension regardless as under £8989. 

A breakdown of the code from the op would clarify. 

Dazed_and_C0nfused

ceewash said:

I have recently started receiving my state pension and have received new tax code of 898L. My other income is from a teacher's pension of about £8000. These are my only incomes. I don't understand why this code is 898L. I thought everyone could earn £12570 before tax so the code should be 1257L. 

As you seem to have been a non taxpayer prior to receipt of the State Pension HMRC will normally include the actual State Pension entitlement for the current tax year in your new tax code.

State Pension is included in your tax code because it's taxable income but DWP never deduct tax from it so, where possible, any tax due is collected from other PAYE sources like your teachers pension.

Your new code could well include ~16 weeks of the State Pension but irrespective of that if your new tax code is 898L and you expect to receive £8,000 from your teachers pension you still won't be paying any tax as your tax code allowances (8980-8989) are more than your teachers pension.

eskbanker

ceewash said:

I have recently started receiving my state pension and have received new tax code of 898L. My other income is from a teacher's pension of about £8000. These are my only incomes. I don't understand why this code is 898L. I thought everyone could earn £12570 before tax so the code should be 1257L. 

ceewash said:

I understand the tax is taken from my teacher's pension but don't understand the tax code.
State pension is £9012 and Teacher's pension £8241.

Probably worth clarifying the projected gross values of each of those two income streams across the 2024/25 tax year, as at least one is presumably pro rata if 'recently started'.

Dazed_and_C0nfused

eskbanker said:

ceewash said:

I have recently started receiving my state pension and have received new tax code of 898L. My other income is from a teacher's pension of about £8000. These are my only incomes. I don't understand why this code is 898L. I thought everyone could earn £12570 before tax so the code should be 1257L. 

ceewash said:

I understand the tax is taken from my teacher's pension but don't understand the tax code.
State pension is £9012 and Teacher's pension £8241.

Probably worth clarifying the projected gross values of each of those two income streams across the 2024/25 tax year, as at least one is presumably pro rata if 'recently started'.

If £9012 is the correct annual State Pension it begs the question why hasn't the op bought some additional qualifying years to get that nearer to the normal new State Pension of £11,502?

There could be a good reason.  Or maybe the op simply doesn't realise the options that are likely to be available 🤔

eskbanker

Dazed_and_C0nfused said:

eskbanker said:

ceewash said:

I have recently started receiving my state pension and have received new tax code of 898L. My other income is from a teacher's pension of about £8000. These are my only incomes. I don't understand why this code is 898L. I thought everyone could earn £12570 before tax so the code should be 1257L. 

ceewash said:

I understand the tax is taken from my teacher's pension but don't understand the tax code.
State pension is £9012 and Teacher's pension £8241.

Probably worth clarifying the projected gross values of each of those two income streams across the 2024/25 tax year, as at least one is presumably pro rata if 'recently started'.

If £9012 is the correct annual State Pension it begs the question why hasn't the op bought some additional qualifying years to get that nearer to the normal new State Pension of £11,502?

There could be a good reason.  Or maybe the op simply doesn't realise the options that are likely to be available 🤔

OP was trying to buy more years last May so maybe the £9012 is the pro rata figure?

https://forums.moneysavingexpert.com/discussion/comment/80811249/#Comment_80811249

Dazed_and_C0nfused

eskbanker said:

Dazed_and_C0nfused said:

eskbanker said:

ceewash said:

I have recently started receiving my state pension and have received new tax code of 898L. My other income is from a teacher's pension of about £8000. These are my only incomes. I don't understand why this code is 898L. I thought everyone could earn £12570 before tax so the code should be 1257L. 

ceewash said:

I understand the tax is taken from my teacher's pension but don't understand the tax code.
State pension is £9012 and Teacher's pension £8241.

Probably worth clarifying the projected gross values of each of those two income streams across the 2024/25 tax year, as at least one is presumably pro rata if 'recently started'.

If £9012 is the correct annual State Pension it begs the question why hasn't the op bought some additional qualifying years to get that nearer to the normal new State Pension of £11,502?

There could be a good reason.  Or maybe the op simply doesn't realise the options that are likely to be available 🤔

OP was trying to buy more years last May so maybe the £9012 is the pro rata figure?

https://forums.moneysavingexpert.com/discussion/comment/80811249/#Comment_80811249

Possibly.  Although I had sort of assumed their opening comment was referring to sometime since Christmas so if £9012 is the pro rate amount either the op has a huge State Pension or our interpretations of "recently" differ somewhat!

I have recently started receiving my state pension