Understanding tax code re: pension

ceewash

[Deleted User] said:

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?

Yes my state pension started November 2024

ceewash

molerat said:

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 ?

molerat said:

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 ?

Yes I have looked at buying the missing years. I spent days trying to get through on the phone line, unsuccessfully, and gave up. I might give it another go.

[Deleted User]

ceewash said:

[Deleted User] said:

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?

Yes my state pension started November 2024

My previous assumption was correct then. Your personal allowance has been reduced by the value of the state pension you will receive in this tax year. 

p00hsticks

ceewash said:

molerat said:

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 ?

Yes I have looked at buying the missing years. I spent days trying to get through on the phone line, unsuccessfully, and gave up. I might give it another go.

Unfortunately now that you are over state Pension Ae it will take much longer to process any additional NI payments - it's a shame you didn't persevere earlier. 

glennevis

p00hsticks said:

ceewash said:

molerat said:

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 ?

Yes I have looked at buying the missing years. I spent days trying to get through on the phone line, unsuccessfully, and gave up. I might give it another go.

Unfortunately now that you are over state Pension Ae it will take much longer to process any additional NI payments - it's a shame you didn't persevere earlier. 

It's still worth pursuing because however long it takes DWP will backdate the pension increase to the date HMRC received the payment.

ceewash

State pension started in November 2024.

ceewash

I'm afraid you've lost me. Please bear with. Can someone explain what they mean by the pro rata amount. The 2 amounts for my state pension and teacher's pension are the annual amounts. Not part year.

Dazed_and_C0nfused

ceewash said:

I'm afraid you've lost me. Please bear with. Can someone explain what they mean by the pro rata amount. The 2 amounts for my state pension and teacher's pension are the annual amounts. Not part year.

But this tax year the State Pension will be a part year, depending when it started 18 to 22 weeks worth.

So a part year State Pension and full year teachers pension is within your Personal Allowance.  But from April 2025 you can expect to start paying tax as your pension income will be ~£18k/year.

[Deleted User]

ceewash said:

I'm afraid you've lost me. Please bear with. Can someone explain what they mean by the pro rata amount. The 2 amounts for my state pension and teacher's pension are the annual amounts. Not part year.

2024/25 will be fine - no tax will be payable. 

You will soon receive a tax code for 2025/26. 

Your personal allowance will be reduced by your state pension, for example £9500, leaving 3070 available which converts to a tax code of 307L to be operated against your teachers pension. 

ceewash

Thank you all. ThinkI've got it now. I will try again to buy back missing years.