HMRC 'prioritises' personal allowance tax code against state pension and wont change to army pension

grahamlerwill

I went through the delightful experience of waiting 45 minutes on the HRMC phone last month to get the correct tax code and apply it to my army pension - reason, to have all the allowance be used against one pension and better understand the numbers.

This month is the first month of state pension and I got a tax code showing most of the personal allowance would apply to state pension, and £185 to the army pension, against my wishes of a month ago.

Another 30 minutes on hre HMRC phone before being told 'this is what we do, and wont change it back'.  The helpline person was unable to state why, or change it back, and was pretty reluctant to get feedback.

Does it change what I get/how much tax  I pay overall, just makes the numbers harder for me to follow, as a person who took 3 goes to get a 'D' in maths in 1979!

Does anyone know why they do this?

Hoenir

grahamlerwill said:

This month is the first month of state pension and I got a tax code showing most of the personal allowance would apply to state pension, and £185 to the army pension, against my wishes of a month ago.

Yes it's how the HMRC has always operated. As the DWP pension system isn't built in the same manner as a payroll system. The state pension is paid gross. Your wishes are of no consequence. 

The HMRC receives many timewasting calls that's why it takes so long to get through these days. 

SiliconChip

Why is having 185 applied to your army pension any more difficult to understand than if it was 1257? If you really don't understand the figures then post the details from your army pension payslip here and we'll explain it to you.

eskbanker

grahamlerwill said:

Does anyone know why they do this?

The sole purpose of tax codes is to drive PAYE deductions, so, as PAYE isn't used for state pension payments, such codes can only be issued to other payers.

grahamlerwill said:

Does it change what I get/how much tax  I pay overall

No.

sheramber

There is no facility to deduct tax from the state pension when it is  paid. It is paid gross. 

Your tax bill is calculated on your annual income and it makes no difference  which pension  your personal allowance is used against. 

 Your tax bill is the same.

It just means the tax is deducted from your army pension . 

LITRG

Hello, we look in detail at how state pension is taxed here: https://www.litrg.org.uk/pensions/state-pension/tax-state-pension/how-tax-collected-state-pension. We are not aware it is possible to 'opt out' of having your PAYE code adjusted for it: https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye12040. Hope this helps