How much tax am I actually paying ? tax code notice confusion

CaptainSkeptical

Hi, I've received two tax code notices from HMRC a few weeks apart and am completely confused by the most recent one.  My cirmustances are I retired in mid March, live in Scotland and in receipt of a defined benefit pension of £40927pa and also a SIPP from which I'm drawing down £7500pa, i.e. a total income of £48427pa.  Using the HMRC tax calculator and also the Money Saving Expert tax calculator (they come out with the same answer) they indicate I should be paying a total tax of £8353pa. I've atatched snips below from my most recent tax code notice but don't understand why I'm only entitled to a tax free amount of £8850 instead of my full personal allowance of £12570.  I also have no idea of how to calulate how much tax these most recent codes mean I will be paying.  The back page of the notice has confused me further as the bands are completely different to what's published on the HMRC website.  I'd really appreciate if someone can tell me, using the tax codes in this most recent notice, how to calculate what I'll actually be paying in tax each year so I can confirm (or not) if it's the same as the HMRC and MSE tax calculators.


 
Thanks in anticipation.

Nomunnofun1

How are the tax bands different? The photo that you provided shows how income is taxed after first taking into account the personal allowance of 12570. The HMRC includes the 12570 personal allowance. 

https://www.mygov.scot/scottish-income-tax/current-income-tax-rates

jem16

Your SIPP is being taxed at 21% but as some of it should be taxed at 42% HMRC has made an adjustment to your tax rate band so that more tax will be taken on your main DB pension to make up for the too little amount being taken on your SIPP. This reduces you tax free amount on your DB pension. You still get your full tax free allowance - the tax code is just a mechanism for collecting tax as near correctly as it can. 

The bands on Note 5 are different because they don’t take into account the tax-free allowance. Add on the £12,570 and it will be the same. 

With regards to tax, it’s made much more complicated due to the various tax bands in Scotland but basically on your DB pension take off £8850. Then the next £2827 is at 19% and so on according to those bands in Note 5.

Dazed_and_C0nfused

CaptainSkeptical said:

Hi, I've received two tax code notices from HMRC a few weeks apart and am completely confused by the most recent one.  My cirmustances are I retired in mid March, live in Scotland and in receipt of a defined benefit pension of £40927pa and also a SIPP from which I'm drawing down £7500pa, i.e. a total income of £48427pa.  Using the HMRC tax calculator and also the Money Saving Expert tax calculator (they come out with the same answer) they indicate I should be paying a total tax of £8353pa. I've atatched snips below from my most recent tax code notice but don't understand why I'm only entitled to a tax free amount of £8850 instead of my full personal allowance of £12570.  I also have no idea of how to calulate how much tax these most recent codes mean I will be paying.  The back page of the notice has confused me further as the bands are completely different to what's published on the HMRC website.  I'd really appreciate if someone can tell me, using the tax codes in this most recent notice, how to calculate what I'll actually be paying in tax each year so I can confirm (or not) if it's the same as the HMRC and MSE tax calculators.


 
Thanks in anticipation.

You are entitled to the full Personal Allowance of £12,570.  It is clearly shown in your tax code.

Your tax code allowances are only £8,850 because an adjustment is needed to counter the fact you are a higher rate payer overall but neither source of income is in the higher rate band on its own.

I agree with your £8,353 figure but you would need to provide April and May payslip details to understand if that is the tax that will actually be deducted.

Have you checked if HMRC have used the £40,927 and £7,500 pension income figures you know to be accurate?

CaptainSkeptical

Thanks for the information folks, that's cleared it up for me. Much appreciated.