Tax Code reduction upon retiring?

NorthernGuy

I retired mid-June this year as a basic rate (20%) tax payer with the default code 1257L, £12,570 personal tax allowance. I claimed a modest work pension from the next day.

Having worked only 2.5 months of this tax year, I had expected that most of that annual allowance would be available for my small pension, meaning little tax to pay. However today, just after my ex-employer has released my final payslip & P45, HMRC contacted me saying they’re giving my pension company a 482T tax code, meaning just a £4,820 allowance.

I realise that first pension payments can be taxed at default rates, and my first pension payslip a few days earlier confirms a 20% tax rate. But with around £10k of my 26-27 tax allowance still unused, why has a tax code allowing only half that amount just been sent to my pension provider? Will this right itself or do I need to contact HMRC?

I have no other untaxed incomes, state pensions etc, to factor in.

Isthisforreal99

Give us a clue, what is the actual adjustment in your tax code that takes it down to 482T?

Will your pension exceed 4820 this tax year?

NorthernGuy

https://forums.moneysavingexpert.com/discussion/comment/82046243#Comment_82046243

Yes my pension will exceed 4820 this tax year. My adjustment was 1257L whilst working to 482T if that's what you mean?

Isthisforreal99

https://forums.moneysavingexpert.com/discussion/comment/82046262#Comment_82046262

No, what does your tax code breakdown actually show - any reductions for anything?

Do you have an online personal tax account - does itbshow that your employment has ceased? Maybe HMRC think you are still employed.

Woodstok2000

How much did you earn in the 2.5 months you worked?

NorthernGuy

https://forums.moneysavingexpert.com/discussion/comment/82046268#Comment_82046268

It doesn't offer any breakdown calculation. I've looked in my Gov gateway account, does that offer the same info as the personal tax account you refer to?

I wondered if HMRC thought I was now drawing employment + pension, but with the former over the personal tax allowance, surely my pension provider would be told to take the full 20% tax, not offered any allowance?

katejo

https://forums.moneysavingexpert.com/discussion/6673759/tax-code-reduction-upon-retiring

I retired at the end of April (basic rate tax payer). My 1st pension payment was slightly low based on an estimate. HMRC had since given my pension provider the correct code and today's 2nd payment was higher. I didn't have to do anything.

Isthisforreal99

What does your estimated income show for the pension for the full tax year 26/27?

NorthernGuy

https://forums.moneysavingexpert.com/discussion/comment/82046305#Comment_82046305

£16k estimate for 26-27, tax due estimate £675. I have paid more than this tax amount whilst employed, So surely no tax due on the small pension?

Dazed_and_C0nfused

482T, in this context, means one of two things, HMRC think you will have very high income and as such a reduced Personal Allowance (which is different to tax code allowances).

Or they have your pension as a second source of income and have allocated 4820-4829 of your tax code allowances to it.

You can easily check which it is by looking at your Personal Tax Account.

Once you know which it is you will be in a far better position to resolve the issue.

sheramber

https://forums.moneysavingexpert.com/discussion/comment/82046288#Comment_82046288

in Government Gateway click on Account Home, scroll down to PAYE, click on that, then click on Check your current pay, pension and income tax details, your tax code information is on that page with links to more information.