Pension Taxed At 50%

mayfly1

I have a tiny private pension that pays out £215 a year. This puts me over the threshold limit of the state pension for paying tax. Fair enough ! But it is taxed at 50% ! I thought the standard tax rate was 20%. Now I've recieved a tax demand for £85. What the…. ? Any advice on why I am being taxed at 50% and how to proceed with this. (I have no other savings or anything under the mattress.)

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6688439/pension-taxed-at-50

How much was your State Pension last tax year (the weekly rate).

DRS1

https://forums.moneysavingexpert.com/discussion/6688439/pension-taxed-at-50

Sounds like 50% was not enough to collect all the tax owed so they had to send you a separate bill for the £85.

The bill should explain how they worked out your income and the associated tax bill. If they got any of their figures wrong then you need to tell them.

Ayr_Rage

As the SP cannot itself be taxed, then any tax due on that (if above the personal allowance) and your other pension can only be taken from that other pension.

Therefore whatever taken will not just be 20% of the value of that pension.

If you want us to check if your bill is correct you'll need to post all your income.

Silvertabby

As previously said, your tax liability is 20% of your total income over £12,570 (assuming you have the standard personal tax allowance). HMRC can't deduct tax direct from your State pension, so their first point of call is your private pension. But they can't take more than half/50% from that pension, so they take what they can, then send you a simple assessment tax demand for the remainder.

mayfly1

Thanks everyone for all your help.

Further info; requested.

I get the 'new' state pension - £241.30 p.week. £12.547.60 p.year.

My private pension pays out £223.32 annually. (Not £215 as I quoted from memory.)

So total annual income is £12.770.92. = £200.92 over the allowance of £12.570

A 20% tax rate on £200.92 should be £40.18p ? Not Half of my private pension ?

Also - if they are taking the due tax, why do I owe them £85 ?

I am very confused !

QrizB

Do you have any other income? Taxable savings interest, for example?

Marcon

https://forums.moneysavingexpert.com/discussion/comment/82185726#Comment_82185726

Have you looked at your Personal Tax Account? If you've not got one, now might be a good time to set one up: https://www.gov.uk/personal-tax-account

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/82185726#Comment_82185726

Have you applied for Marriage Allowance?

Also, are you mixing up your tax years. £241.30 is the current rate but presumably the demand you have received was for the previous tax year?

horsewithnoname

HMRC cannot collect more than 50% of your source of income, so regardless of your code you may still owe tax. You need to consider your whole income rather than shouting about your pension being taxed at 50%.

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82185726#Comment_82185726

If all this tax relates to the same tax year that suggests you may have taxable income of £13,553.30 (unless you have done the marriage allowance thing).

Did you look at the tax calculation or couldn't you find it? If not then it may be on your personal tax account. Maybe also look for your tax code and see how that was worked out.

Are you sure you are getting the full new state pension and not some higher figure?