Help think tax code is wrong after pension drawdown

oliel

This year my estimated earnings are total £42914. This includes £9473 taxable pension drawdown (excludes 25% tax free bit) My tax code was S12750L (includes uniform allowance). I paid £2741 tax on the pension drawdown which was emergency taxed and should have been £1989. I filled out the hmrc form to get the refund P53Z - I think When i checked my hmrc tax account today it shows a breakdown of estimated tax due for the year totalling £6119 but at the top says we estimate your tax to be £6915 - difference £796. They have now changed my tax code to S924 and are trying to take another £796 off me I have no idea where the £6915 figure comes from as it doesn't agree to their breakdown of the tax calculation. Is this an error? I thought I was due tax back on the Pension drawdown - the difference between the emergency tax of £2741 and £1989 that the tax should have been. Any help greatly appreciated.

molerat

Are all the estimated incomes correct in the tax account ?

What code have they set against the pension ?

oliel

https://forums.moneysavingexpert.com/discussion/comment/82037556#Comment_82037556

Yes I believed estmated income is correct Breakdown as follows

salary £32059 - original tax code s1275 now s924

other pension income £ 1445 tax code sd0

Taxable pension drawdown £9473 tax code not confirmed

untaxed interest income @£27

total income £42914

tax calculation - tax free 12750

19% on £3967 - £754

20% on £12989 - £2598

21% on £13181 - £2768

total tax per HMRC breakdown £6119

Estimated per HMRC tax is £6915 less £6119 difference of £796 which is that they are trying to get back via tax code.

molerat

That drawdown pension should have a code allocated, usually happens within a day or 2 of taking it.

oliel

https://forums.moneysavingexpert.com/discussion/comment/82037630#Comment_82037630

Found the paperwork for the pension the tax code is 1257l week 1 months 1

Woodstok2000

Is the tax code change definitely to recoup money from last year, or is this change related to your expected income/tax for 2026/27?

molerat

https://forums.moneysavingexpert.com/discussion/comment/82037807#Comment_82037807

That will be the emergency code for the first withdrawal, what is the code showing in your on line tax account ?

What is showing for the expected income from that source ?

Cobbler_tone

People will spit out their cornflakes but it is exactly the kind of thing AI will guide you on. If you can be bothered to input taxable income, tax code and tax paid by month, it'll tell you what you should have paid and the reasons it may be different. Quality in, quality out.

Based on your second post (for example):

This looks like a Scottish income tax calculation (because of the 19%, 20%, 21% bands), and overall it broadly hangs together, but there are a few things worth pointing out so you can sense‑check HMRC’s position clearly.

🧾 What you’ve got

Income sources

• Salary: £32,059 (tax code dropped from S1275 → S924)
• Other pension: £1,445 (SD0 = fully taxed at higher bands, no allowance)
• Pension drawdown: £9,473 (tax code unknown)
• Interest: £27

✅ Total income: £42,914

🧮 Personal allowance

• Standard allowance: £12,750
• Leaves taxable income ≈ £42,914 – £12,750 = £30,164

✅ This aligns with your figures.

🧾 Scottish tax breakdown (your numbers)

• 19% on £3,967 → £754
• 20% on £12,989 → £2,598
• 21% on £13,181 → £2,768

✅ Total tax = £6,119

That calculation is consistent with Scottish tax bands — no obvious issue there.

🔍 The key issue: why HMRC says £6,915

HMRC estimate:

• Total tax due: £6,915
• Your calculated tax: £6,119
• Difference: £796

👉 And they’re collecting this via your reduced tax code (S924 vs S1275).

🧠 What HMRC is likely doing

They are almost certainly adjusting your tax code to recover underpaid tax, likely due to one or more of these:

1. Pension income not taxed correctly during the year

• Your £9,473 drawdown with "tax code not confirmed" is the biggest red flag
• If this was paid:
  • with an emergency code, or
  • partially untaxed

👉 HMRC may estimate you’ve underpaid tax on it.

2. SD0 tax code on the £1,445 pension

• SD0 means no personal allowance applied
• Everything taxed at marginal rates

✅ That part is OK structurally, but:

• If the drawdown pension also didn’t use the right code, you could have overlapping allowance issues

3. Tax code reduction from S1275 → S924

That’s a drop of:

• £12,750 → £9,240
• Reduction of £3,510 allowance

👉 Multiply that by ~20% basic tax = ~£700👉 That’s VERY close to your £796 difference

✅ So this confirms:

HMRC is deliberately reducing your allowance to recover tax owed.

📊 Your interpretation (✅ mostly correct)

“difference of £796 which is that they are trying to get back via tax code”

✅ Yes — that’s exactly what’s happening.

The only nuance:

• The £6,915 vs £6,119 gap might include:
  • estimated underpayment from prior year
  • or assumed under-taxed pension this year
• Not just a pure arithmetic mismatch

⚠️ Things to double-check

These matter because HMRC could be slightly off:

✅ 1. Pension drawdown tax treatment

• Was tax actually taken from the £9,473?
• What tax code did they use?

👉 This is the most likely source of discrepancy

✅ 2. Coding notice breakdown (P2 notice)

Look for:

• “Estimated tax you owe”
• “Adjustment to recover underpayment”

👉 That will explicitly confirm the £796

✅ 3. Whether you’re being taxed twice on pensions

Sometimes:

• One pension uses allowance
• Another assumes it doesn’t

This can distort PAYE mid-year.

🧾 Bottom line

• ✅ Your tax band calculation is sound
• ✅ The £796 difference is almost certainly a coding adjustment
• ⚠️ The pension drawdown treatment is the key unknown

👍 Practical takeaway

You’re not being “overcharged” outright — HMRC is:

spreading an estimated underpayment across your salary via a lower tax code.

✅ If you want to be sure

I can:

• Reconstruct the exact HMRC calculation
• Or check if they’ve overestimated the underpayment

Just tell me:

• Was tax deducted from the £9,473 drawdown (and roughly how much)?

I'm sure someone will pull something apart in there but probably some good indication of what is going on in your situation and you can keep drilling down.

oliel

https://forums.moneysavingexpert.com/discussion/comment/82037821#Comment_82037821

Expected income 26/27

oliel

I keyed this into a pension tax calculator and the figures came in at the £6117 not £6915 - The £6117 agreed to the breakdown on the HMRC portal. I asked HMRC about the difference between £6915 and £6117 they couldn't answer and just kept saying it may change as the p53 claim is in. The taxable pension I received was £9473 - I was taxed £2741 on this 1257L Month 1 Week 1 (not Scottish rate used). No tax underpaid from previous years. When I keyed into pension tax calculator it stated that i would be emergency taxed and the tax would be £2741 - which agrees to what they took and that the actual tax I should pay on it should be £1989. I put a p53 claim in for the difference. As far as I can tell they owe me money back and my tax code shouldn't be changed - I've paid the correct tax on my earnings this year and been emergency taxed on my pension???

Woodstok2000

Are you expecting the same income for this coming year, including the tax free portion of the pension etc...?