Tax Query

Desert Orchid

Desert Orchid

Senior Jockey
Joined
Aug 2, 2005
Messages
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Calling anyone who knows about this stuff...

I got my new tax code in yesterday. Am I reading it correctly?

It looks like my state pension is being deducted from my tax-free allowance:


Personal allowance - £12570
Total - £12570
Less State Pension - £8441
Less adjustment to rate bands - £150
Total tax-free amount - £3979
Click to expand...


Does this mean I am effectively paying for my own state pension?
 
Thanks, simmo, but I'm still not seeing it.

Let's say my work pension is £20000 and my State Pension is £8441, ie 28441 total.

If my allowance is 12570 then I should be paying tax on 15871, @ (an average of, say) 20%, ie 3174, leaving me with 25266.

If they're saying my tax-free amount is 3979 then it looks like I'm being taxed on 24462, which looks like working out around 4892, leaving me with 23548, a difference of -1717.

Not as drastic as thinking they were doing me for eight and a half grand but enough to annoy me (for now, until I get a better handle on what's happening.)

Why do they make these things so fvcking complex, though.
 
Desert Orchid said:
Thanks, simmo, but I'm still not seeing it.

Let's say my work pension is £20000 and my State Pension is £8441, ie 28441 total.

If my allowance is 12570 then I should be paying tax on 15871, @ (an average of, say) 20%, ie 3174, leaving me with 25266.

If they're saying my tax-free amount is 3979 then it looks like I'm being taxed on 24462, which looks like working out around 4892, leaving me with 23548, a difference of -1717.

Not as drastic as thinking they were doing me for eight and a half grand but enough to annoy me (for now, until I get a better handle on what's happening.)

Why do they make these things so fvcking complex, though.
Click to expand...

In the (bold) example you have posted does your reasoning still apply if you substitute your 20000 with , say, 4150 (or 4129 even?)
 
2017diary said:
In the (bold) example you have posted does your reasoning still apply if you substitute your 20000 with , say, 4150 (or 4129 even?)
Click to expand...

I really don't know.

4150+8441=12591, so tax would only apply to £21, would it not?
 
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Correct. So why didn't you make more than one calculation to find the tax on my work pension figure of 4150 like you did on your work pension of 20000? (You mentioned being taxed on 25266, 15871 & also 23548 when you tried to work out tax on your 20K work pension).

I think I'm trying to say that you only had one way of working out mine but you gave 3 different amounts for yours
 
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I do a couple of (Irish) payrolls -as I see it you will pay no tax on your state pension and the First €3979 of your occupational pension will be tax free.
 
2017diary said:
Correct. So why didn't you make more than one calculation to find the tax on my work pension figure of 4150 like you did on your work pension of 20000? (You mentioned being taxed on 25266, 15871 & also 23548 when you tried to work out tax on your 20K work pension).

I think I'm trying to say that you only had one way of working out mine but you gave 3 different amounts for yours
Click to expand...

I'm still lost here. Did I give 3 different amounts for the example I cited?
 
LUKE said:
I do a couple of (Irish) payrolls -as I see it you will pay no tax on your state pension and the First €3979 of your occupational pension will be tax free.
Click to expand...

I think it must be the way the notification is presenting it.

In my head, I'm adding up my income (I don't think my work pension is 20k, that was a rounded up figure for the sake of the working example), deducting the personal allowance and calculating the tax from there. I don't understand why HMRC can't do the same.
 
State pension is taxable but is paid gross. Historically, the threshold for paying tax has always been above basic pension plus extras like SERPS but Hunt has frozen the threshold so, to my cost, it's now possible to have a 'negative' tax code from state payments. All tax is reclaimed from occupational or private pensions.

You basically add all the gross pension payments, subtract the personal allowance and the rest is taxable. HMRC note the state pension amount and, if you have more than one occupational/private pension, apply the personal allowance to one and tax the others at the standard rates. If your HMRC record is up to date it should include occupational pensions showing the tax code pertaining to each pension. Getting it up to date may involve extended telephone communication with someone who is not particularly helpful but is generally considered to be your responsibility.

I went through all this 10 years ago. State pension gross, main private pension - tax code applied, other private pensions taxed at basic rate (tax code BR). Took a while to sort but has worked since.
 
Desert Orchid said:
Calling anyone who knows about this stuff...

I got my new tax code in yesterday. Am I reading it correctly?

It looks like my state pension is being deducted from my tax-free allowance:





Does this mean I am effectively paying for my own state pension?
Click to expand...

The value of your state pension is being taken as all taxable in this calculation. You will only be eligible under this calculation for tax not to be charged on £3979 ie your 'personal allowance' is now only £3979 instead of £12570. So paying/being charged tax against the difference of £8590.00. It's not an additional £3979.

I am currently in the middle of another row with HMRC, last one in 2019 took me a year to get them to admit they cannot add up and had overcharged me for tax and for me to get it back. Challenge it and ask them to explain it at the very least. I have an email address if it will help as after 8 letters, with no response and 6 issues of tax codes, all different and all wrong, I finally had an actual written response from a human who gave me an email address to contact them directly. Appreciate in a different tax area to you but welcome to have it if it will help. Not only did I get my tax back, I received a 'goodwill' payment. They wouldn't admit in so many words that they had made a mistake but I still had it corrected and a small amount of compensation.
 
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