How to calculate Rate Band Adjustment?

jem16

I have 3 sources of income - 2 pensions plus a state pension.

Cumulatively they take me into the Scottish Higher rate band but neither one of the private pensions on their own do. So my tax code includes a deduction for the state pension plus a rate band adjustment. My other pension has a tax code of SD0 which is all at the 21% Intermediate rate.

I’d like to check the rate band adjustment figures but haven’t a clue how to go about it. It doesn’t appear to be a simple reduction of the amount above the higher rate threshold. I suspect because the 21% rate is also in the mix.

Is there a simple method of working this out or a calculator that does it for me?

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6668682/how-to-calculate-rate-band-adjustment

I'm not aware of a simple method. Or a calculator.

But what is key is the estimated amount HMRC think you will get from each of the PAYE pensions(which can be seen on your Personal Tax Account), and the tax code currently in place for each pension.

Once you have that information (and the Scottish rate bands) I think you can reverse engineer it.

jem16

https://forums.moneysavingexpert.com/discussion/comment/82001789#Comment_82001789

Yes I’ve got all of that. I just don’t know how to reverse engineer it.

Dazed_and_C0nfused

So how much of the intermediate rate band is your "main" pension (K code or L suffix) using?

And how much is the second one using?

And how much is the adjustment to rate band deduction?

jem16

Let me work that out and get back to you. My main code is a K code even without the rate band adjustment.

jem16

Ok - with a tax code of K997 on main pension.

Main pension uses all of the Intermediate band of £14,135.

Other pension uses SD0 so £18,500 all taxed at 21%.

Rate band adjustment is £9250.

molerat

Do you pay into a pension ? That adds to the fun.

jem16

https://forums.moneysavingexpert.com/discussion/comment/82001875#Comment_82001875

Yes I forgot that bit! £1886 added for the £3600 gross pension payment.

jem16

Any ideas or should I just accept HMRC’s figures as it all comes out in the wash anyway once my SA is done each year?

molerat

I think you will struggle making any sense of the adjustment, mine certainly doesn't - the tax rate on the income stream x the band adjustment deduction would collect too much tax - but calculating how much tax I will pay comes out within £1 of their figure and the amount they say I save due to the pension payment works out as well. The adjustment is calculated using the estimated incomes shown so if they are incorrect the adjustment will be incorrect - changing those will change the adjustment and may also change the pension payment addition. I just work out if my tax will be correct and pretty much ignore how they got there if it is.

jem16

https://forums.moneysavingexpert.com/discussion/comment/82002897#Comment_82002897

Yes it looks like you’re correct and probably will just concentrate on that too.

It would make life easier if Scotland would get rid of these stupid multiple tax bands.