State Pension Over-reporting by DWP to HMRC

Boodedoo

For the first State Pension payment into the bank each year from the DWP, my OH gets an amount equal to 2 weeks at the previous years rate and 2 weeks at the new rate for for the current tax year.
The subsequent 12 payments are at the new rate and don't vary. That all makes sense.

When DWP report the yearly figure as income to HMRC they calculate the annual figure as 13x the new rate - so are overstating his actual income by 2 weeks x the weekly increase . HMRC reduce his tax free allowance by this full amount and he pays tax on his company pension via PAYE.

HMRC say they 'cannot' alter the figure given to them by DWP and advise ringing them to enquire and get them to change it.
We have tried that, and it rings for a while then cuts off - repeatedly.

I assume this may affect just about retired person who pays tax and may, as is possible for my OH this year, just tip the scales into a higher rate band.

Other than snail mail does anyone know of another way to contact DWP? 

eskbanker

This comes up fairly regularly, for taxation purposes state pension income is based on calculated entitlement over the tax year, rather than what was actually received.

Edit: here's the relevant section of the Income Tax (Earnings and Pensions) Act 2003 defining this:

Taxable pension income

If section 577 applies, the taxable pension income for a tax year is the full amount of the pension, benefit or allowance accruing in that year irrespective of when any amount is actually paid.

https://www.legislation.gov.uk/ukpga/2003/1/section/578

Dazed_and_C0nfused

With State Pension you aren't taxed on what you receive, it's the entitlement that counts.

Marcon

Boodedoo said:

For the first State Pension payment into the bank each year from the DWP, my OH gets an amount equal to 2 weeks at the previous years rate and 2 weeks at the new rate for for the current tax year.
The subsequent 12 payments are at the new rate and don't vary. That all makes sense.

When DWP report the yearly figure as income to HMRC they calculate the annual figure as 13x the new rate - so are overstating his actual income by 2 weeks x the weekly increase . HMRC reduce his tax free allowance by this full amount and he pays tax on his company pension via PAYE.

HMRC say they 'cannot' alter the figure given to them by DWP and advise ringing them to enquire and get them to change it.
We have tried that, and it rings for a while then cuts off - repeatedly.

I assume this may affect just about retired person who pays tax and may, as is possible for my OH this year, just tip the scales into a higher rate band.

Other than snail mail does anyone know of another way to contact DWP? 

They won't change it because there's nothing to change - really unhelpful suggestion from HMRC. Maybe they'd do well to read the answers above and understand why the figures are actually correct!

Boodedoo

Thanks all. Have passed on the info and though we think its odd, accept that it is what it is. 

and to be fair to HMRC, the young man OH spoke to was very helpful and 'has' changed other figures from the P800 to match what was actually paid. 

Wingnut1001

I noticed this anomaly today and phoned HMRC (40mins wait!). They said they can only go on what the DWP tell them and that I should phone them.
I phoned the DWP ( 4mins) and they said what the OP said above, but that it should 'cancel out over the years!
I just check my records (3yrs) and found that the DWP have consistently overstated my state pension when I compare to my bank statements.
£5.07 22/23
£17.09 23/24
£15.85 24/25
This can't be right! If this is happening to all pensioners, the Treasury must be benefiting by £millions each year!

EL_T

Me too!!

Martin, I hope you are reading this, Uk pensioners are being rinsed and fobbed off by HMRC.  Or maybe perhaps it is a directive from Rachael to fill her coffers.

Below is my third submission to HMRC which explains how it should be according to their PAYE manual. However it appears their two tier complaint service and working from home, preventing less experienced HMRC staff from asking colleagues, is resulting in pensioners being fobbed off with imaginative and unrelated answers that are AI and/or internet generated, including blaming the DWP, when it is HMRC who are responsible for the calculation not the DWP who merely tell them what they tell us in our increase letter, our new uplifted weekly payment.

Even worse I only discovered this because I received a P800 for 2024-2025 because I was caught by increasing interest rates.  The HMRC Gateway does not show the charge for previous years.

Also below is a link to a Daily Express article dated February this year with contributions from HMRC officials which clearly outlines the principle of 1 week at the previous years rate and 51 weeks at the uplifted rate, but which it seems many HMRC employees have not read.

\Good Morning,

Ref P800 State Pension Coding Error

Thank you for your email dated 16 March.  My apologies for the slightly tardy reply, due to it taking some time to research this matter.

I beg your indulgence and request an answer to a simple question.

Why has my P800 Pension State coding been based on 52 weeks at the uplifted rate commencing April 2024 when

1 The PAYE76030 manual states

State Pension Age (SPA) is on or after 6 April 2010 [which applies to me]

Where an individual reaches or has reached their SPA on or after 6 April 2010, their pension payday (Monday to Friday) will be allocated based upon the final two numbers of their National Insurance number. There will be no increase in benefit during the first week in April and as a result, the Uprating Service will always calculate the CY+1 coding deduction based on 1 week at the old rate and 51 weeks at the new rate [not 52 weeks at the new rate].

2 The PAYE76030 manual also advises that the coding can only be based on 52 weeks at the new rate if the SPA is before 6 April 2010 (which does not apply to me), and if certain criteria are met.  As my SPA is post April 2010, my coding for a tax year can never be based on 52 weeks at the new rate.

SPA is before 6 April 2010

Where the individual reached their state pension age prior to 6 April 2010, DWP make payments of state pensions on a fixed payday. State pension is paid on a Monday, except for widow beneficiaries who receive their pension on a Tuesday.

As a result the Uprating Service will calculate the CY+1 coding deduction according to the day on which 6 April falls. This is because where 6 April falls on a week day after the Monday, these pensioners will only receive the new rate of state pension for 51 weeks.

The Uprating Service will therefore use the calculations below to calculate the annual amount to be included in the code

• In years when 6 April 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 6 April falls on a Saturday, Sunday or Monday, the Uprating Service calculates the coding deduction at 52 times the new rate

3 My state pension tax code for 2024-2025 complied with the PAYE76030 manual and was based on 1 week at the previous years rate and 51 weeks at the ‘uplifted’ rate. 

Attached is the text of a Daily Express article where HMRC officials quite clearly emphasise the principle of one week at the previous years rate plus 51 weeks at the new rate for a given tax year.

Could you please explain in detail technically how/why this error has arisen?   If you are unable to identify the source of the anomaly so we understand what action is required where, and/or correction of my P800 is not within your remit, then please say so to avoid unnecessarily taking up any more time on both our parts. In this event would you be kind enough to pass this matter onto the appropriate person/department which specialises in State Pension tax administration.

If you require a copy of my pension entitlement from the DWP (although you are already aware of the 2024-2025 uplift) and evidence of payments of the above to resolve this matter satisfactorily, please let me know and I will happily email them to you.

FYI PAYE76030 Para 2 advises ‘You should be aware that there may be some instances where the amounts notified by the DWP are not representative of the true annual figure. Where a pensioner notifies you of a different figure, code the amounts advised by the pensioner’.

Kind regards

https://www.express.co.uk/finance/personalfinance/2169470/hmrc-state-pension-tax

Albermarle

Or maybe perhaps it is a directive from Rachael to fill her coffers.

This system has been in place long before anyone had even heard of Rachel Reeves !

kipsterno1

https://forums.moneysavingexpert.com/discussion/comment/81945861#Comment_81945861

I stopped reading after that line.

FIREDreamer

https://forums.moneysavingexpert.com/discussion/comment/81945733#Comment_81945733

Isn’t the difference between 1/51 and 0/52 less than £2 in tax per annum for a basic rate taxpayer based on the 2025/26 increase?

It’s less than 4 pence a week.

Or am I missing something?

Costs more in energy to get in a state about this?

Boodedoo

Maybe the point was that we 'should' be able to trust that HMRC are following their own published rules?