Tax code query

FIREDreamer

Not sure if this is the correct board - a mod may move this post to a more appropriate board if required.

I retired last year and am married. I have bought a second annuity as I didn’t really fancy using drawdown which means I am now a 40% taxpayer with pension this tax year of about £55k and possibly taxed interest of £1,500. I will be doing the £3,600 maximum allowed gross contribution (£2,880 net to SIPP) every tax year until age 75.

HMRC have changed my tax code as follows:

I should no longer get the marriage allowance as will be paying some 40% tax this year.

Is this explained in the deduction of £3,425 in the personal allowance?

There is nothing on my online account to explain the logic behind this adjustment - also there is no underpaid tax from last year 2024/25 to allow for as I paid the calculated shortfall in early May.

This tax code is used by my annuity provider. My two DB pensions are taxed at BR.

It looks like there will be a tax underpayment this tax year based on this?

Dazed_and_C0nfused

FIREDreamer said:

Not sure if this is the correct board - a mod may move this post to a more appropriate board if required.

I retired last year and am married. I have bought a second annuity as I didn’t really fancy using drawdown which means I am now a 40% taxpayer with pension this tax year of about £55k and possibly taxed interest of £1,500. I will be doing the £3,600 maximum allowed gross contribution (£2,880 net to SIPP) every tax year until age 75.

HMRC have changed my tax code as follows:

I should no longer get the marriage allowance as will be paying some 40% tax this year.

Is this explained in the deduction of £3,425 in the personal allowance?

There is nothing on my online account to explain the logic behind this adjustment - also there is no underpaid tax from last year 2024/25 to allow for as I paid the calculated shortfall in early May.

This tax code is used by my annuity provider. My two DB pensions are taxed at BR.

It looks like there will be a tax underpayment this tax year based on this?

The adjustment to rate band is nothing to do with Marriage Allowance.

And your Personal Allowance has not changed, it is clearly shown as £12,570.

It is because HMRC see you as liable to higher rate tax overall but not on any one source of PAYE income.  Which means a D0 (40%) code can't be used against the DB pensions.  The adjustment to rate band is intended to collect the extra tax due because a D0 code can't be used.

You will eventually owe tax due to receiving Marriage Allowance.  Ideally you would get this removed now to prevent this.  Not sure how you can do that though.

The personal pension relief would normally only be £1,800 but is presumably £3,600 for the same reason as you need the adjustment to rate band entry.

The adjustment to rate band entry is very dependent on your estimated taxable income at each PAYE source.  You will know what these are going to be (pay on each P60 next April) so worth checking if HMRC have got accurate estimates or not.  If not you can update those values in your online account.

sheramber

Your wife needs  to cancel the marriage allowance transfer.
 It can be done online.
 
The transfer will remain in your tax code until the end of the tax year when your tax for the year will be reviewed. 

FIREDreamer

sheramber said:

Your wife needs  to cancel the marriage allowance transfer.
 It can be done online.
 
The transfer will remain in your tax code until the end of the tax year when your tax for the year will be reviewed. 

Thank you, we did it on my wife’s HMRC account.