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taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4973
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Good morning, I am a a retired Police officer and was looking

Resolved Question:

Good morning,
I am a a retired Police officer and was looking forward to an increase in my pension when I turned 55 last month, my pension has in fact gone down because of my tax codes.
My annaul pension is £20,853, I'm in full time employment with a salary of £34,250. Could you please tell me what my tax code should be and how much tax should I be paying. I'm due a annual pay rise and I'm worried could find myself worse off. Although I have a good income an expensive divorce means that I don't have any spare cash.

Tim
Submitted: 3 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 3 years ago.
Hello and welcome to the site. Thank you for your question.

Tax calculations - tax year 2013/14
Total income is (20,853+34,250) = 55,103
Personal allowance = 9,440
Taxable income (55,103-9,440) = 45,663
Tax due
Income taxed at basic rate (32,010x20%) = 6,402
Income taxed at higher rate (13,563x40%) = 5,461
Total income tax due = £11,863

The tax office would have applied tax code 944L against your pension income. This means that full personal allowance is allocated against the pension.

It is likely salary from employment would then be taxable at OT or D0 rate.
More information on what tax codes mean can be found here

http://www.hmrc.gov.uk/incometax/codes-basics.htm


I hope this is helpful and answers your question.


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Customer: replied 3 years ago.

What is the cut off point that would stop me being in the higher tax bracket? It seems like I'm working for nothing, what would my optimum salary be?

Expert:  taxadvisor.uk replied 3 years ago.

Tim, thank you for your reply.

The cut off point for Tax year 2013/14 is £32,010 of taxable income or gross income of (32,010+9440) = £41,450.

Once your gross earnings exceed £41,450 then you will be paying 40% tax on additional income.

The rates for tax year 2014-15 are
Higher rate threshold £41,865 - (optimum income from all sources)
Personal allowance £10,000

 

First £31,855 of taxable income attracts tax at basic rate of 20%.

 

Thereafter additional income would attract tax at 40%.

I hope this is helpful and answers your question.

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