Partial Retirement Tax

Sootyandspark

Can someone please help me understand my tax codes and if these are correct. 

I took partial retirement and reduced my working hours by 20% in July. 

Reduced annual salary is: £63,598.40 and pension is £19,741.56 per annum. 

Pre-PR tax code was 1263L and first month’s pension (tax code 1257L) was £1276.69. Second month pension is £800.49 tax code D0. Salary tax code is 375T (August) and 1257L (July). 

Please explain in simple terms as I don’t understand taxation. Thanks 😊

Marcon

If you don't have a personal tax account, it might be helpful to sign up for one: https://www.gov.uk/personal-tax-account

In the meantime, you can check here to understand what the codes (or more especially the letters in which the codes end) mean: https://www.gov.uk/tax-codes/what-your-tax-code-means

Dazed_and_C0nfused

Sootyandspark said:

Can someone please help me understand my tax codes and if these are correct. 

I took partial retirement and reduced my working hours by 20% in July. 

Reduced annual salary is: £63,598.40 and pension is £19,741.56 per annum. 

Pre-PR tax code was 1263L and first month’s pension (tax code 1257L) was £1276.69. Second month pension is £800.49 tax code D0. Salary tax code is 375T (August) and 1257L (July). 

Please explain in simple terms as I don’t understand taxation. Thanks 😊

It is highly likely the 375T reflects two changes of note.

Tax owed of £510 in respect of the first pension payment.

A reduced Personal Allowance as your estimated adjusted net income will be in excess of £100,000.  HMRC will not know your new salary (if that is even relevant) will be £63,598 as your payments so far this tax year would reflect a higher estimated income.

What you need to do is calculate what you expect your P60 from each source, job and pension, will show next April and update your Personal Tax Account with your more accurate information.

That will prompt a new tax code calculation and I suspect your main code will increase somewhat and probably no longer need the T suffix.

Sootyandspark

Marcon said:

If you don't have a personal tax account, it might be helpful to sign up for one: https://www.gov.uk/personal-tax-account

In the meantime, you can check here to understand what the codes (or more especially the letters in which the codes end) mean: https://www.gov.uk/tax-codes/what-your-tax-code-means

Thanks - I already have an account set up as needed to submit a self assessment a couple of tax years ago (a whole other saga!). 

I’ll have a root around the link and see how to fo this. If not, I’ll probably ring HMRC next week. 

Dazed_and_C0nfused

Sootyandspark said:

Marcon said:

If you don't have a personal tax account, it might be helpful to sign up for one: https://www.gov.uk/personal-tax-account

In the meantime, you can check here to understand what the codes (or more especially the letters in which the codes end) mean: https://www.gov.uk/tax-codes/what-your-tax-code-means

Thanks - I already have an account set up as needed to submit a self assessment a couple of tax years ago (a whole other saga!). 

Sorry for being so dim but what do I need to do - complete a self assessment? 

Nothing you have posted suggests that will be necessary.

Accessing your Personal Tax Account is so you can see exactly what has changed in your tax code.

Sootyandspark

Dazed_and_C0nfused said:

Sootyandspark said:

Can someone please help me understand my tax codes and if these are correct. 

I took partial retirement and reduced my working hours by 20% in July. 

Reduced annual salary is: £63,598.40 and pension is £19,741.56 per annum. 

Pre-PR tax code was 1263L and first month’s pension (tax code 1257L) was £1276.69. Second month pension is £800.49 tax code D0. Salary tax code is 375T (August) and 1257L (July). 

Please explain in simple terms as I don’t understand taxation. Thanks 😊

It is highly likely the 375T reflects two changes of note.

Tax owed of £510 in respect of the first pension payment.

A reduced Personal Allowance as your estimated adjusted net income will be in excess of £100,000.  HMRC will not know your new salary (if that is even relevant) will be £63,598 as your payments so far this tax year would reflect a higher estimated income.

What you need to do is calculate what you expect your P60 from each source, job and pension, will show next April and update your Personal Tax Account with your more accurate information.

That will prompt a new tax code calculation and I suspect your main code will increase somewhat and probably no longer need the T suffix.

This makes sense - thanks. Wish me luck as nothing is straight forward with HMRC 😊

Albermarle

Sootyandspark said:

Marcon said:

If you don't have a personal tax account, it might be helpful to sign up for one: https://www.gov.uk/personal-tax-account

In the meantime, you can check here to understand what the codes (or more especially the letters in which the codes end) mean: https://www.gov.uk/tax-codes/what-your-tax-code-means

Thanks - I already have an account set up as needed to submit a self assessment a couple of tax years ago (a whole other saga!). 

I’ll have a root around the link and see how to fo this. If not, I’ll probably ring HMRC next week. 

Ringing them usually means a long wait ( unless you phone at 08.00) and the quality of the advisors you speak to can vary.
Updating your estimated income for the tax year is one of the easier jobs to do on line.

Sootyandspark

@Dazed_and_C0nfused thanks for the replies so far and one final question - if first month’s pension (tax code 1257L) was £1276.69. Second month pension is £800.49 tax code D0 - will I ever get £1200 pension in future or was that just a one off. Is it possible to forecast? 

Dazed_and_C0nfused

Sootyandspark said:

@Dazed_and_C0nfused thanks for the replies so far and one final question - if first month’s pension (tax code 1257L) was £1276.69. Second month pension is £800.49 tax code D0 - will I ever get £1200 pension in future or was that just a one off. Is it possible to forecast? 

Presumably your pension increased to £1,334 for the second payment?

If so then whilst you are earning ober £60k at your employments then you will continue to pay 40% tax on your pension, getting £800/month after tax.

That is only going to change when you stop work or reduce your hours further so you aren't paying higher rate tax at your job.

Sootyandspark

Dazed_and_C0nfused said:

Sootyandspark said:

@Dazed_and_C0nfused thanks for the replies so far and one final question - if first month’s pension (tax code 1257L) was £1276.69. Second month pension is £800.49 tax code D0 - will I ever get £1200 pension in future or was that just a one off. Is it possible to forecast? 

Presumably your pension increased to £1,334 for the second payment?

If so then whilst you are earning ober £60k at your employments then you will continue to pay 40% tax on your pension, getting £800/month after tax.

That is only going to change when you stop work or reduce your hours further so you aren't paying higher rate tax at your job.

Gross has been £1333.69 both months. I assume I just didn’t pay enough tax last month so this balances it out. Last month’s tax was £57 - which now thinking about it, was low. I assume the pension will level out in the coming months and be different in the new financial year as the reduced salary and pension together won’t be pro-rata? 

Dazed_and_C0nfused

Sootyandspark said:

Dazed_and_C0nfused said:

Sootyandspark said:

@Dazed_and_C0nfused thanks for the replies so far and one final question - if first month’s pension (tax code 1257L) was £1276.69. Second month pension is £800.49 tax code D0 - will I ever get £1200 pension in future or was that just a one off. Is it possible to forecast? 

Presumably your pension increased to £1,334 for the second payment?

If so then whilst you are earning ober £60k at your employments then you will continue to pay 40% tax on your pension, getting £800/month after tax.

That is only going to change when you stop work or reduce your hours further so you aren't paying higher rate tax at your job.

Gross has been £1333.69 both months. I assume I just didn’t pay enough tax last month so this balances it out. Last month’s tax was £57 - which now thinking about it, was low. I assume the pension will level out in the coming months and be different in the new financial year as the reduced salary and pension together won’t be pro-rata? 

Nothing more is likely to change re your pension now.

How much do you expect your P60 in April 2027 to show for your job?  If that is >£50,270 then I wouldn't expect the tax code for your pension to change next year either.

But am a bit confused why you put this in your original post 🤔

first month’s pension (tax code 1257L) was £1276.69