Pensioners Tax Code Help
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curlydog
Posts: 9 Forumite
in Cutting tax
My mum was widowed in October last year, having not worked for many years and relied solely on her husbands pension. She had no independent income, other than the state pension (she's just turned 70).
In October she started to draw the spouses pension from her husband's company pension.
She has a P60, issued in April this year, which shows a final tax code of 1150L. Her first pension/pay slip of this tax year (issued in April) shows a tax code 269L.
This seems very low so I advised her to ring HMRC. They said it was right.
I'm a complete novice regarding tax matters, but I though a pensioner should not be paying any tax on the first £11500 (hence the tax code 1150L). The new tax code indicates that she is paying tax on all her income except the first £2690 which seems extremely low.
Does this appear right?
Thanks
In October she started to draw the spouses pension from her husband's company pension.
She has a P60, issued in April this year, which shows a final tax code of 1150L. Her first pension/pay slip of this tax year (issued in April) shows a tax code 269L.
This seems very low so I advised her to ring HMRC. They said it was right.
I'm a complete novice regarding tax matters, but I though a pensioner should not be paying any tax on the first £11500 (hence the tax code 1150L). The new tax code indicates that she is paying tax on all her income except the first £2690 which seems extremely low.
Does this appear right?
Thanks
0
Comments
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The state pension is paid tax free, so that's normally chopped off the tax code for any other pension.0
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The State Pension is taxable but DWP don't ever deduct any tax from it.
Her tax code will include a deduction for the State Pension so that overall she should be paying roughly the correct amount of tax.
Depending on the amount of each pension she received in the 2017:18 tax year she may owe some tax for last year but without full details it's impossible to say for certain.
A tax code of 269L suggests she has a State Pension of around £176/week or £763 every 4 weeks. Note State Pension cannot be paid monthly.
The tax code would be
£11,850 Personal Allowance less State Pension £9160 = £2690 allowances left = tax code 269L
The result of this is that, as you hoped, she isn't paying any tax on the first £11,850 of her pension income (£9,160 from DWP and £2,690 from her new pension).0 -
The state pension is paid tax free, so that's normally chopped off the tax code for any other pension.
That may be it then. If I subtract the annual state pension from the £11500 allowance it leaves £2956 which I guess is somewhere in the region for a tax code of 269L.
thanks for your information0 -
Great information. Thank youDazed_and_confused wrote: »The State Pension is taxable but DWP don't ever deduct any tax from it.
Her tax code will include a deduction for the State Pension so that overall she should be paying roughly the correct amount of tax.
Depending on the amount of each pension she received in the 2017:18 tax year she may owe some tax for last year but without full details it's impossible to say for certain.
A tax code of 269L suggests she has a State Pension of around £176/week or £763 every 4 weeks. Note State Pension cannot be paid monthly.
The tax code would be
£11,850 Personal Allowance less State Pension £9160 = £2690 allowances left = tax code 269L
The result of this is that, as you hoped, she isn't paying any tax on the first £11,850 of her pension income (£9,160 from DWP and £2,690 from her new pension).0 -
She should have received a coding notice during March/April that explains how the tax code is arrived at.0
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I advise you to check the tax code carefully. I have just discovered that the Pension Service are declaring to the Inland Revenue that I should pay tax on 14 weeks pension in the last financial year. However I didnt receive 14 weeks pension - one was a part week and the last 4 weeks payment fell into the next financial year.
I suspect that this is something they consistently get wrong. You might think it makes very little difference - but I dont imagine when you die anyone is going to be checking your tax code and you may end up being taxed on up to 4 weeks pension that you havent actually been paid.0 -
I advise you to check the tax code carefully. I have just discovered that the Pension Service are declaring to the Inland Revenue that I should pay tax on 14 weeks pension in the last financial year. However I didnt receive 14 weeks pension - one was a part week and the last 4 weeks payment fell into the next financial year.
I suspect that this is something they consistently get wrong. You might think it makes very little difference - but I dont imagine when you die anyone is going to be checking your tax code and you may end up being taxed on up to 4 weeks pension that you havent actually been paid.
If you're talking about state pension then it may not be wrong, as I understand it the amount used for tax purposes is what they say they are due to pay in the year, even if the actual payments are slightly out and some of it falls into the previous or next tax year.0 -
a lot of people consistently fail to understand how state pension worksI advise you to check the tax code carefully. I have just discovered that the Pension Service are declaring to the Inland Revenue that I should pay tax on 14 weeks pension in the last financial year. However I didnt receive 14 weeks pension - one was a part week and the last 4 weeks payment fell into the next financial year.
I suspect that this is something they consistently get wrong. You might think it makes very little difference - but I dont imagine when you die anyone is going to be checking your tax code and you may end up being taxed on up to 4 weeks pension that you havent actually been paid.
the state pension is declared to HMRC as how much you are entitled to receive in the tax year, not what you actually receive as cash in the tax year
that is why when doing a tax return you are expected to use the figures on the letter sent to you by DWP setting out how much you will get each week times number of weeks (it may be a 53 week tax year for example). That also then picks up the slight delay in April when the pension entitlement is increased just after the start of the tax year so you have x weeks at £A/week and x weeks at £B/week
if you simply declare the cash received in your bank between 6th to 5th April then you risk HMRC rejecting your tax return as it will be deemed to be wrong0
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