AVIVA

clairbear_3

https://forums.moneysavingexpert.com/discussion/comment/82164314#Comment_82164314

Im trying to avoid the getting taxed and claiming it back rigamarole..what do you suggest ..maybe taking £1047/month?

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82164348#Comment_82164348

1047 pm will work if a that is all taxable income (not a mix of tax free and taxable) b you only have the one source of income and c your Tax Code for that one source of income is 1257L.

You may not tick all those boxes.

If your tax code for this pension is 1160 then your monthly taxable income from that pension could be 966 without tax being deducted but if that takes your total taxable income from all sources for the tax year over 12570 then you may have a tax bill later (and they may tinker with the tax code at some point to collect it so you'd need to keep an eye on that. Quite apart from the fact that you think the tax code is wrong).

One way to go might be to work out how much taxable pension you want to draw (maybe enough to use up all your personal allowance for the year?) and then draw that in March. By that time they may have sorted out your tax code and you will have as much of the monthly instalments of the 0% rate as you will ever have in a tax year built up so even if the taxable amount is over 1047 that month you may still not get any tax deducted.

DRS1

I should have said that my last paragraph works if you have a cumulative tax code but won't if it is a non cumulative code. A non cumulative code would have an X on the end (or maybe W1 or M1).

clairbear_3

just got a letter from HMRC explaining my new tax code but its left me more confused

apparently 1161L means my total tax free amount has reduced to £11617 from £12570(income tax threshold)

the reason: they are guessing I will make £953 interest on my savings!

my understanding is you are allowed to make £6K over £12570 TAX FREE savings interest

so WHY the reduction??

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82166349#Comment_82166349

That is a question which gets asked a lot. The somewhat confusing answer which gets offered is that HMRC will reduce your tax code by any untaxed interest where you are not using all your personal allowance on eg the pension. If you go into your tax account and increase your estimate of what you will draw from your pension then the untaxed interest deduction will vanish from your tax code. I can't say I have ever tried that myself and obviously you may not want to do it if you are not going to draw more from your pension.

ali_bear

I also had a large estimate of interest being earned bringing down my tax code. I have just told them about a small increase in my pension income (true) and I'll report back if my tax code gets adjusted.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82166349#Comment_82166349

The reduction is a quirk of how HMRC works.

On the other hand, the £5K savings starter allowance is taxable, so is not reflected in any tax code. It is taxable at 0%, which is different.

ali_bear

https://forums.moneysavingexpert.com/discussion/comment/82166349#Comment_82166349

Within 24hr of telling them about an increase in my pension income I got a new tax code. The estimate of interest earned this year is now about right (nice) but I don't have a scooby about why that should change - other than that they already had the data (from my bank) and my declaration triggered an update. But also they have somehow decided I will receive 2.5K of additional untaxed income - from where I have no idea - so now I have an even lower tax code than before. Grumpy face.

Hopefully soon they will complete the tax calculation for last year and I'll get back that chunk of overpaid tax.

Remember team - tax first, ask questions later!

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82167100#Comment_82167100

The last time HMRC thought I had more income for a tax year than I thought I did it turned out it was me that was wrong - I had missed some interest on a closed account. Of course I blamed Nationwide but it always pays to triple check your figures.