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Tax codes

Community Veteran
Posts: 7,929
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Registered: 02-08-2007

Tax codes

Once you reach 65 your tax code changes but you also get your state pension.
If you are already getting a second pension how long does it take the tax office to notify your pension provider ?
I ask because I assumed the amount of my second pension would be reduced as a result of the state pension but this has not happened and I do not want to get a letter a some future date telling me I owe them hundreds of pounds.
17 REPLIES
pierre_pierre
Grafter
Posts: 19,757
Registered: 30-07-2007

Re: Tax codes

I wish I knew, my tax should be simple, one Company pension, Taxed, One state, taxed.  Last year I got a hefty check back for overpaid tax, and to be honest I dont know why
Community Veteran
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Registered: 12-08-2007

Re: Tax codes

From memory mine didn't take long.  I was sent a simple form to fill in showing all my incomes and then the main pension provider was instructed to adjust my tax code accordingly. They may also give you an emergency code (BR) as an interim measure until they calculate your real code. I found a telephone call to my tax office speeded things up and they were very helpful.
The one problem I did have was when my extra age allowance wasn't given to me.  They put this right with a phone call.
Community Veteran
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Re: Tax codes

Thanks for that.
A couple of months before my 65th birthday I did get a form from the tax office which didn't take long to fill in asking about any current pension, interest on savings etc so I assumed with this information it would not take them long to get things sorted out but there has been no change to the second pension.
This might be due to christmas as I guess they may have had an extended break, plus shortage of staff due to Flu etc, However your comments are very helpful as I will contact them if no change takes place next month.
I am very much aware of the millions of people who have had letters from the tax office informing them they owed hundreds of pounds, resulting in a few sleepless nights if you have already spent the money !
Community Veteran
Posts: 18,552
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Registered: 12-08-2007

Re: Tax codes

There is a major backlog of letters at the tax offices so a phone call may help.  When I last phoned them they actually calculated I owed them money but wrote it off whilst we were speaking.  I guess it was another case solved as far as they were concerned.
Tax offices are normally open from 8am to 8pm and I had no problem in getting through to then very early or late in the day.  A bit difficult during normal hours.
Community Veteran
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Registered: 06-04-2007

Re: Tax codes

Confirming the comment from artmo, I called my tax office a few days ago as it is getting close to the 31st which is the deadline for paying money that you owe, they started sending out new coding notices on Monday if you have under/over paid a few pounds of tax, so they should be arriving in the post soon. But do call your local tax office to be sure.
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Community Veteran
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Registered: 30-08-2007

Re: Tax codes

In connection with another pension topic of mine in this forum, I called my tax office on this very subject.
You should call your tax office without delay. Tax Code changes are not automatically allocated. Since I am not retiring from work on my 65th birthday my personal allowance increases (reducing tax) However, since I also receive a pension from a former employer my gross income will exceed by a small amount £20,000 (combined) so my personal allowance will not quite be the maximum available but quite close to it. I assumed that this would start on my 65th birthday but in fact is available now (just over a month early) my (very helpful and knowledgeable) contact also noted that there were another couple of allowance adjustments in my favour. My personal allowance is also to be split between my two incomes, which also marginally reduces the tax burden.
It can be quite a long time getting through to an agent but, its well worth the effort.
Don't forget to claim your National Insurance Exemption certificate.
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Community Veteran
Posts: 18,552
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Registered: 12-08-2007

Re: Tax codes

Petlew, I don't understand the bit about splitting your allowance over 2 incomes.  I have a similar situation.  Do you know why this is beneficial?
Community Veteran
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Re: Tax codes

Quote from: artmo
Do you know why this is beneficial?

Can't see how it is as the Revenue do an overall calculation at the end of year.
Unless you don't ever fill in a tax form and there's a small "rounding error".  Shocked
Mind you I have to fill a form in as I get (non-state) pensions from 2 different sources plus some self-employed income.
(and have to pay twice a year too, being self-employed  Sad )
Community Veteran
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Registered: 30-08-2007

Re: Tax codes

I have to say I was slightly mystified by that one as well. I'm waiting to see when the tax coding arrives exactly what (if any) difference it makes. I only quote the agent I was speaking to. Up till now I have always paid all my tax through my employment pay, letting my second pension be paid free of stoppages (I recall several years ago I requested this) the agent simply said that this was the expensive way to do it. I suspect my reply was Oh! and let it pass. I agree I should have asked for an elaboration. I'll try and find out and let you know.
Experience; is something you gain, just after you needed it most.

When faced with two choices, simply toss a coin. It works not because it settles the question for you. But because in that brief moment while the coin is in the air. You suddenly know what you are hoping for.
jmd
Grafter
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Re: Tax codes

If you look on the web about Tax there is something about but cannot find the link at present.  But I am sure that someone will!
thejudge
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Re: Tax codes

As someone 'on the inside', as it were, I can say this:
When you hit 65 (and I strongly advise that you hit it before it hits you!), you become entitled to an additional age-related personal allowance. You are entitled to this for the full tax year in which you reach 65.
The age-related portion of your personal allowance begins to reduce if your overall income goes over a certain amount (£22900 this year, £24000 from 06/04/11). It is reduced by £1 for every £2 you are over that limit, but cannot be reduced below the basic personal allowance (£6475 this year, £7475 in 11/12).
Because the State Pension isn't taxed before you are paid it, but is taxable income, the amount of State Pension you receive is deducted from your total personal allowance, e.g.
Total Personal Allowance (with full age-related addition ages 65-74): £9490 less State Pension (a figure plucked out of the air because it varies) £6500 equals a net allowance of £2990.
If you have an occupational pension, that £2990 will be set against that first, so that you won't be liable to tax on the first £2999 of that pension. If your pension is less than that (say, £2490 a year), the surplus allowances of £500 can be set against any other PAYE income source you have (e.g. another occupational pension, a part-time job). If there are no surplus allowances left, any other PAYE source will have a BR (Basic Rate) code, which means that those sources will be taxed at 20%.
All of the above is just an example, and the usual disclaimers apply.
The form you were sent Gleneagles was probably a P161, which should enable us to work out the code(s) correctly. However, as artmo says, we have substantial backlogs of post on hand at the moment, so things won't necessarily be sorted out in time to prevent you paying too much or too little tax in the short term. However, we now have a brand-new, all-singing, all-dancing computer system which will automatically reconcile your tax records after the end of the tax year and issue any repayments due or advise you of any underpayments. It will make things a lot simpler and quicker (it says here - don't get me started!).
The following link may be of further help: http://www.hmrc.gov.uk/pensioners/index.htm
jmd
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Re: Tax codes

Thanks for that information - very helpful!  So if I am 65 in Feb 2012, my tax allowance from April this year 2011/12 should change?  So I need to check that in April as it could make some difference to my income!  I had not realised it was the tax year in which your birthday came.
Community Veteran
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Registered: 12-08-2007

Re: Tax codes

Yes the increased allowance is given in the tax year you become 65, but give your tax office a call to ensure they apply it for you.  The increased allowance is £9490.
Community Veteran
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Registered: 12-08-2007

Re: Tax codes

By the time you get there Josie the age allowance will be £9940 which will apply for the tax year 2011-12.  Here's a chart showing the figures:
Allowances