Unexpectedly paying tax

waiting_for_sunshine

Hello,

I'm a new user here and hoping someone can help me to clarify my tax situation;

I receive a local government pension which will be £9972.76 for the 26/27 tax year (increased from last year's £9707.67). I also have income of £6,154 for 25/26 from savings interest. I've never paid tax as my total income is within my total allowances (including savings allowance and starting rate for savings). As I do not pay tax my husband benefits from marriage allowance.

My April 2026 payslip now shows a £5 tax deduction and a change in my tax code from 1068N to 960N, which I wasn't expecting.

I logged into my tax account and it shows the following:

"Your total estimated income from private pension is estimated at £13,443 this tax year. You have a tax-free amount for your private pension income. This means the first £9,606 of your private pension earnings are tax-free"

The breakdown of my income is given as:

Personal allowance £12,570
Additions £0

Deductions
Marriage Allowance £1260
Untaxed interest £1704
Total deductions £2964

Total tax-free amount £9,606

There is no mention of the personal savings allowance or starting rate for savings. In fact my savings interest will be reduced considerably this year due to funding cash ISAs for me and my husband.

Could someone explain this to me so that I'm clear in my understanding if I need to ring the tax office. Also, how does this affect the marriage allowance?

eskbanker

I receive a local government pension which will be £9972.76 for the 26/27 tax year (increased from last year's £9707.67)

[…]

I logged into my tax account and it shows the following:

"Your total estimated income from private pension is estimated at £13,443 this tax year.

You can adjust the projected pension income within your online tax account, which should then flow through to more accurate PAYE coding.

waiting_for_sunshine

There's a conflict in the information - when I go to update the projected pension is shows £9,606. Why would it say in the summary my pension estimate is different?

I can't make any sense of the figures and to me there's nowhere that explains why I would be taxed £5 - my estimated tax for 26/27 is shown as £0.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81987568#Comment_81987568

It sounds like you are going to have to call them. Best to call at 08.00 sharp when the lines open. Normally you get through in 10 to 20 minutes at that time.

There is no mention of the personal savings allowance or starting rate for savings.

That is because they are not allowances. Savings interest is taxable income, but in your case will be taxed at 0%

molerat

The only thing that is important at the moment is what it shows under that particular income stream, many of those calculation amounts you see are a fudge and make no sense - they often lump all your taxable income together, including interest at 0%, and put it under one heading - so calling them will be a waste of everyone's time. Change that income stream to the correct amount and the code will change to accommodate it - you must use up your normal allowance before you are able to use the 0% allowances for interest so HMRC allocate interest to any allowance that is remaining. With a code of 960N you have an allowance of £800.76 pm so an income of £831 will have £5 tax deducted, when the code is changed you will get that back in the next payment. You will need to do this every year especially if you have income under the full allowance and receive interest.

aussie96

This sounds like a situation that happened to me and I tried to explain in a previous thread. There is no reason why the tax codes should be changed as mine was because they taxed me on my Interest on saving when I should not have been. I got tax on anything over the £1000 limit instead of the correct £6000 limit.

waiting_for_sunshine

I updated my pension income on the HMRC app to this year's expected amount and when I logged back in today my tax code changed to 998 so I'm hoping this is now resolved.

I hadn't realised how this works and wrongly thought that my personal allowance less marriage allowance would automatically become my tax code.