£200 a month tax increase after getting State Pension whilst still working

Reidy100

My wife gets her state pension end June, she is still working. The guy that does the wages told her new tax code has  changed to K55X and that she will be paying £200+ per month extra in tax.
Her old tax code was the usual 1250 one Is this correct for a working  person getting their state pension ? 

TIA Reidy

dasherman

Assuming she's getting the full rate of £230 per week, it sounds about right to me.

Marcon

Reidy100 said:

My wife gets her state pension end June, she is still working. The guy that does the wages told her new tax code has  changed to K55X and that she will be paying £200+ per month extra in tax.
Her old tax code was the usual 1250 one Is this correct for a working  person getting their state pension ? 

TIA Reidy

A 'K' tax code shows that someone is receiving untaxed income from another source (in this case state pension) and the amount they receive exceeds their personal allowance - so yes, looks reasonable. The 'X' at the end indicates it is an emergency (i.e. temporary) tax code, so it might well change again once her state pension is actually in payment.

LHW99

The tax will depend on her total income, ie total amount of SP, plus gross salary. Will it push her into a higher tax bracket?

luvchocolate

Would she consider deferring her state pension whilst still working?

HappyHarry

luvchocolate said:

Would she consider deferring her state pension whilst still working?

Or alternatively, increase her workplace pension contributions pension to maximise tax-relief on the additional income.

Stubod

State pension around £12k.....20% of £12k is £2,400, £2,400 / 12 = £200......so sounds about right...

badmemory

As the state pension would normally now only be about £11900 for a full year which would leave some personal allowance.  That is also for a full tax year of payments, so 13 payments not the probable 11 payments.  So is there something else affecting the code.  Check carefully what the notification says.  Unfortunately the DWP has a nasty habit of notifying HMRC of pension as if it is for the full tax year even when it obviously isn't.  They will refund so the money isn't lost but it is irritating.  It is always possible that some old SERPS may have inflated the state pension.

What the code says is that there is tax due on income this year of about £12625  that isn't being directly taxed.  So state pension & any other possible income.

Cobbler_tone

She could recycle her state pension? i.e. lump the equivalent into her private pension if she has that headroom and earns enough…or defer it…or accept that extra tax is due on the extra income she now gets.

Marcon

badmemory said:

As the state pension would normally now only be about £11900 for a full year which would leave some personal allowance.  That is also for a full tax year of payments, so 13 payments not the probable 11 payments.  So is there something else affecting the code.  Check carefully what the notification says.  Unfortunately the DWP has a nasty habit of notifying HMRC of pension as if it is for the full tax year even when it obviously isn't.  They will refund so the money isn't lost but it is irritating.  It is always possible that some old SERPS may have inflated the state pension.

What the code says is that there is tax due on income this year of about £12625  that isn't being directly taxed.  So state pension & any other possible income.

The X indicates it's a temporary tax code, so it'll be reviewed automatically. 

OP, if you wife doesn't have a personal tax account, now would be a good moment to sign up for one: https://www.gov.uk/personal-tax-account

Dazed_and_C0nfused

Marcon said:

badmemory said:

As the state pension would normally now only be about £11900 for a full year which would leave some personal allowance.  That is also for a full tax year of payments, so 13 payments not the probable 11 payments.  So is there something else affecting the code.  Check carefully what the notification says.  Unfortunately the DWP has a nasty habit of notifying HMRC of pension as if it is for the full tax year even when it obviously isn't.  They will refund so the money isn't lost but it is irritating.  It is always possible that some old SERPS may have inflated the state pension.

What the code says is that there is tax due on income this year of about £12625  that isn't being directly taxed.  So state pension & any other possible income.

The X indicates it's a temporary tax code, so it'll be reviewed automatically. 

OP, if you wife doesn't have a personal tax account, now would be a good moment to sign up for one: https://www.gov.uk/personal-tax-account

In this situation there is unlikely to be any review in respect of the State Pension though.

The op said it was £200 extra tax so his wife was presumably already a taxpayer.  And in that situation the annual amount of State Pension  (52 x weekly rate) is included in the code and non cumulative basis applied.  

It will normally remain like that (annual State Pension and non cumulative basis) for the rest of the current tax year.