Are State Pension payments split between FY25/26 and FY26/27?

Annemos

Your calculation for 2026-2027 looks like mine (the state pension and untaxed interest added in. And a small bit of prior year tax owed for you, too).

We go negative overall compared to the Personal allowance and so we get that as a K code for that negative amount. (They will take the tax on it back through the coming year.)

K122 is shorthand for them clawing back the tax on the NEGATIVE 1237 tax free amount. (It is divided by ten in the Code basically, for some weird reason!)

The way they do it, State pension plus untaxed interest income plus that tax you owe reduces the Personal allowance and that has gone negative.

The two pensions with the BR code will be taxed at 20%. The other one gets this K code and is the one where the tax on 1237 of extra income will be clawed back (over and above its 20% tax).

That Starter Rate for interest is pretty difficult!

I googled and found this

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• For every £1 of non-savings income above the Personal Allowance, the starting rate for savings is reduced by £1. For example, if an individual earns £16,000 from wages, they have already used up their Personal Allowance, leaving £3,430 of their earnings taxable. This £3,430 reduces their £5,000 starting rate for savings, leaving them with £1,570 that can be earned in interest tax-free.

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1 Am I right in thinking that you have 3401 + 2878+ 1842+ 12,536 pensions… = 20,657

For every pound above 12,570 personal allowance, you lose a pound of the Starting Saver Rate. You are then at 8,087 which is above the 5000, so you don't get any of that Starting Saver Rate. Is that how it works??

2 I suppose the other thing to watch, I think… Is your estimated untaxed interest actually 2,207? And so they have already subtracted the 1000 pounds tax free, which you ARE allowed??? To get to 1,207 untaxed interest.

When I just told them my amount of untaxed interest, I gave the system the amount AFTER I had already taken the 1000 off.

I stress I am not an expert on this….. so I can only say how I see it.

I did do 35 years in other Tax Systems, so am not completely clueless. But UK Tax does stump me sometimes!

greyhoundwalker

My first concern is them thinking I'll get 15164 private pension income this FY when the actual figure is just 8221.

Also confusing is if I owe 386 tax this year, why will they only have collected 64 by the end of this FY but then show 64 as "Underpayment from previous year" for FY26/27? Then there's the seemingly random figure of 25.02 on the "Estimated tax you owe" page, and 102, 387 and 77 on the "Your detailed PAYE Income Tax estimate" page.

I realised I'd no longer qualify for the starter rate for savings once my income exceeded 12570, as it has done this year now that I'm getting my NSP. Although I've slightly exceeded the 1000 allowance this year, it won't be an issue next FY as I'll move more into my ISA.

Maybe I'm just not understanding how HMRC works, but I was expecting that for FY26/27, my total income of 20757 (yes, 3 private pensions 8221 plus NSP 12536) would have 12570 deducted and the balance of 8187 taxed at 20% meaning I'd pay 1637 tax. As they're already collecting tax from one of my private pensions, I thought they'd increase the monthly deductions on that same one rather than taxing all 3. Where I'm saying 1637 tax, they're saying 1871.

Thanks for replies so far, and in advance to anyone who may be able to explain things further.

Annemos

First of all, I cannot see where they get that Total Estimated Income from for 2025-2026 of 15,164……

Because the actual purple and pink coloured bars right underneath that are correct! You have 3401 + 2874 + 1842 +4835 state pension = total of 12,957 income. And they correctly say, personal allowance is not taxable of 12,570. So just the 387 is taxable and the tax is 102 pounds.

So I haven't a clue where that 15,164 comes from. Also what is that 386 tax owed?

I am completely lost in their calculation. What a mess this System is!

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Re the 26-27. Through the year, no tax is taken off the State Pension. Instead they reduce your personal allowance by that amount. Your personal allowance is negative with that untaxed Interest income and prioer year tax owed also subtracted off. So no personal allowance gets allocated on the private pensions.

So each of them is taxing you at 20% through their withholdings. And one of them will add a bit more for the tax on the negative personal allowance (due to the untaxed interest and the tax owed from previous year).

Your negative personal allowance for 26-27 is "Minus 1237" x 20% = 247. This is in their tax calculation of 1871. (Although there seems to be another small error of 20 pounds under. I make it 1892!)

I think they have (attempted) to do…..

8221 pensions + 12536 state pension + 1207 untaxed interest + 64 (to get back last years tax owed of 13 pounds: at 20% tax on that 64) Minus personal allce 12,570 = 9458 x 20% = 1892!

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81889568#Comment_81889568

@greyhoundwalker

You assumed wrongly about the savings starter rate band. If your only taxable income was £10,460 it would all be covered by your Personal Allowance and the savings starter rate band is of no relevance to you for that tax year.

Why do you think State Pension of £4,779 is correct for 2025/26, not £4,835?

What aspect of it are you concerned about?

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81890046#Comment_81890046

@greyhoundwalker

The £15,164 isn't your private pension income.

It is your estimated total income. Pensions (including State Pension) and taxable untaxed interest (but not ISA interest as that is tax free.

£8,122 + £4,835 + £2,207

HMRC haven't said you owe £386 either, they have reduced your tax code allowances by £386 to try and collect the £25.02 they estimate you owe.

greyhoundwalker

Thank you for the replies. I think I'm starting to get it now 🤔

The wording "Estimated tax you owe this year … 386" on one page and then the 25.02 figure on the next is rather confusing. There is also the page saying "Total Income Tax estimate 102", so it's very hard to know which figure is correct. If I only owe 25.02 why have they been taking 12.80 per month since November, meaning they'll have collected 64 by the end of this FY? They then show 64 as an underpayment. It was seeing so many apparently conflicting figures that set me to thinking that something was amiss, it seemed as if each page was saying different things.

While I can see that yes, the 15164 is showing as total income, I think I'd only skimmed that initially and clicked on the green "View detailed Income Tax estimate" bar to see the next page where it clearly states "Your total income from private pension is estimated at 15164 this tax year". That was what started the alarm bells ringing.

Then upon seeing the minus figures for FY26/27, I panicked a bit and took them to mean they were looking to collect 13807 in tax next FY!

Yes, NSP figure 4835 is correct 👍️

I suppose my concern/confusion mostly comes down to mistakenly expecting to see a simple calculation of Total Income, minus Personal Allowance = tax payable on the difference. But HMRC obviously use a more detailed/convoluted formula.

I feel somewhat reassured now, so will just wait it out and see what transpires come the new FY.