Why so much tax on a very small pension?

mrsyardbroom

I tried to ring the helpline for this question but after ten minutes of listening to recorded messages telling me I could go through everything online or hold on for an advisor, they asked me a lot of security questions and then said they couldn't take my call, good bye.

I have a small works pension coming in which is only £901 a year. On the P60 it gives the total for the year as £901.85 and the total tax for the year as £38.40.

On the advice of payment for the month and for every month for the rest of the tax year it says the gross amount I will get is £76.65 and tax will be £11.80.

This is what I don't understand. I get paid per calendar month and 12 x £11.80 = £141.60.  That's a lot more than £38.40.
Can you see why I'm puzzled?
I hope this isn't going to be repeated on my other works pension or I will be seriously out of pocket.

Albermarle

How much is your other works pension?
Are you getting the state pension?
Do you have any other income?
What is the tax code for this pension?

amibovvered

Assuming your personal allowance is taken up by your other income, tax at 20% on £901 would be £180.20. Which is pretty nearly £141.40 plus £38.40 - were you paid any of the pension in the last financial year?

Dazed_and_C0nfused

mrsyardbroom said:

I tried to ring the helpline for this question but after ten minutes of listening to recorded messages telling me I could go through everything online or hold on for an advisor, they asked me a lot of security questions and then said they couldn't take my call, good bye.

I have a small works pension coming in which is only £901 a year. On the P60 it gives the total for the year as £901.85 and the total tax for the year as £38.40.

On the advice of payment for the month and for every month for the rest of the tax year it says the gross amount I will get is £76.65 and tax will be £11.80.

This is what I don't understand. I get paid per calendar month and 12 x £11.80 = £141.60.  That's a lot more than £38.40.
Can you see why I'm puzzled?
I hope this isn't going to be repeated on my other works pension or I will be seriously out of pocket.

Your State Pension will be more in this new tax year.

That is always paid gross with no tax so any extra tax is taken from your works pension.

If the Personal Allowance remains frozen you may end up having 50% tax deducted, the maximum a pension payer is allowed to deduct.

And then have to pay any extra owed direct to HMRC.

mrsyardbroom

I get a state pension and another works pension, plus a small amount earned from surveys. I declare that although most people don't. The total is £13,890. I haven't had the P60 for the other works pension yet, but I'm assuming they will tax that as well.

The first P60 has said the tax for the year is £38.40, but they're charging me a lot more.

On the Government Gateway it says I have a tax free amount. It doesn't say if it's in addition to the personal allowance or not. The tax code is 70T

mrsyardbroom

I discovered most people don't declare money on side hustles when HMRC posted on Facebook. The post said you must pay tax on money earned on your side hustles. There were hundreds of comments. They all said words to the effect that what they earned outside of work goes in their pocket.

mrsyardbroom

Dazed_and_C0nfused said:

Your State Pension will be more in this new tax year.

That is always paid gross with no tax so any extra tax is taken from your works pension.

If the Personal Allowance remains frozen you may end up having 50% tax deducted, the maximum a pension payer is allowed to deduct.

And then have to pay any extra owed direct to HMRC.

I still have no idea whether the tax-free amount is in addition to the personal allowance. If so then I shouldn't pay any tax at all.

Dazed_and_C0nfused

mrsyardbroom said:

Dazed_and_C0nfused said:

Your State Pension will be more in this new tax year.

That is always paid gross with no tax so any extra tax is taken from your works pension.

If the Personal Allowance remains frozen you may end up having 50% tax deducted, the maximum a pension payer is allowed to deduct.

And then have to pay any extra owed direct to HMRC.

I still have no idea whether the tax-free amount is in addition to the personal allowance. If so then I shouldn't pay any tax at all.

No, the tax free amount will relate to your tax code allowances.  Which will include your Personal Allowance.

But a T at the end of the code is indicative of a third pension (or job).  Have you looked to see what your Personal Tax Account shows.

Marcon

mrsyardbroom said:

I discovered most people don't declare money on side hustles when HMRC posted on Facebook. The post said you must pay tax on money earned on your side hustles. There were hundreds of comments. They all said words to the effect that what they earned outside of work goes in their pocket.

If their turnover is no more than £1K in a tax year, it doesn't have to be declared.

Marcon

mrsyardbroom said:

I tried to ring the helpline for this question but after ten minutes of listening to recorded messages telling me I could go through everything online or hold on for an advisor, they asked me a lot of security questions and then said they couldn't take my call, good bye.

I have a small works pension coming in which is only £901 a year. On the P60 it gives the total for the year as £901.85 and the total tax for the year as £38.40.

On the advice of payment for the month and for every month for the rest of the tax year it says the gross amount I will get is £76.65 and tax will be £11.80.

This is what I don't understand. I get paid per calendar month and 12 x £11.80 = £141.60.  That's a lot more than £38.40.
Can you see why I'm puzzled?
I hope this isn't going to be repeated on my other works pension or I will be seriously out of pocket.

That's about another £8.60 a month in tax. Has your state pension gone up by about £516 a year?

mrsyardbroom

Dazed_and_C0nfused said:

mrsyardbroom said:

I still have no idea whether the tax-free amount is in addition to the personal allowance. If so then I shouldn't pay any tax at all.

No, the tax free amount will relate to your tax code allowances.  Which will include your Personal Allowance.

But a T at the end of the code is indicative of a third pension (or job).  Have you looked to see what your Personal Tax Account shows.

This is what the Government Gateway says,

Your tax code is worked out from your tax-free amount. Your tax-free amount is the income you can have before paying tax and any additions or deductions

Your annual tax-free amount is

£2,016

It can be:

• increased if you qualify for certain allowances or tax reliefs
• decreased to collect tax due for company benefits or income from other sources.'
  
  I'm assuming this is the amount I can earn from self employment before paying tax on those earnings.
  

The personal allowance is given separately and that is the standard £12,500 for people on BR.