Inherent annual incorrect reporting of State Pension by DWP to HMRC

plc1954

Each year, HMRC rely on the annual state pension figure reported to them by DWP for tax purposes..

State pension payments are always in arrears so the first payment on or after 6th April is always less than subsequent payments because a proportion of it always includes an element at the previous year's rate (most noticeable so if your payments are 4 weekly).

However DWP always reports the annual entitlement which means that every tax year, what you actually receive in that tax year is always slightly less than the amount that HMRC use when calculating any tax owed for the year.

HMRC and DWP tell me that no one has ever pointed this out before! The potential additional tax implication is comparatively small but is anyone else aware of this and tried to get it corrected?

NoMore

Been discussed many times, here's a recent thread

State Pension Over-reporting by DWP to HMRC — MoneySavingExpert Forum

Marcon

https://forums.moneysavingexpert.com/discussion/6662452/inherent-annual-incorrect-reporting-of-state-pension-by-dwp-to-hmrc

Why do you think it's wrong? That's the statutory basis. See https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim75020

badmemory

They have had it pointed out to them. When I had to do self assessment I used to point it out every single year & now I am on simple assessment I still do it & they accept the corrected figure every year. The amount I receive for Friday 10th April will be less than that I receive for Friday 17th April even though I will not receive it until Friday 24th April.

Marcon

I am on simple assessment I still do it & they accept the corrected figure every year.

No - they accept your figure because they know when to accept defeat! The correct one is the one they provided, given that the state pension is accounted for (and ultimately taxed) on an accruals basis, not on the basis of cash received in the period.

p00hsticks

State pension payments are always in arrears so the first payment on or after 6th April is always less than subsequent payments because a proportion of it always includes an element at the previous year's rate

Not if you get paid weekly - then it is paid in advance. My mothers weekly SP pension that she received yesterday (2nd April) is around £20 more than the previous weeks.

plc1954

@p00hsticks

Could your mother have reached pensionable age before 2010 as I believe payment basis changed that year?

plc1954

@Marcon

I've read that legislation and to me the intention is to deal with elected deferrals of payment. This anomaly has arisen and nobody has corrected it.

The letter sent by DWP to the pensioner to confirm the yearly increase states the amount of the first payment in the tax year and the higher full monthly payment for the remainder of the year. Why can't this info be given to the HMRC?

It's clearly not equitable that, even if we are talking about small differences, income is taxed before being received if that hasn't been elected.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81948762#Comment_81948762

This explains about what HMRC do.

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye76030

molerat

The letter sent by DWP to the pensioner to confirm the yearly increase states the amount of the first payment in the tax year and the higher full monthly payment for the remainder of the year.

Not everyone gets that information, some (like me !) only get the new weekly amount with no other figures. (and it is 4 weekly payments not monthly)

plc1954

@molerat

Yes sorry I meant 4 weekly of course. Maybe you only get the letter if you're paid 4 weekly?