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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4416
Experience:  FCCA FCMA CGMA ACIS
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I have just started receiving my state pension, so my tax

Customer Question

I have just started receiving my state pension, so my tax code has changed. I am also in receipt of 2 private pensions, one a civil service and the other a local government pension. I have contacted the tax office to ensure that my tax liability was taken from the same pension I had always paid it from. Now they tell me that my tax code for the remainder of this tax year will not allow for the £10000 tax free allowance everyone else gets, because their systems only operate on a pensioner receiving the full year's pension, do you understand what I am saying? This means that instead of paying about £6.00 per month tax I will be charged approximately £140.00 per month from my £10300 annual income.

Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.
Yes, I get the message! What HMRC are saying that as both your public service pensions are in themselves below the GBP 10K per annum [the Personal Allowance] they cannot operate the normal procedure for a person in your position which is to issue your pension paying organisation a code number net of your State pension. It is a most unfortunate position, but there is little that can be done to resolve it unless PAYE arrangements change, an unlikely scenario.
In the end, of course, you will not loose out. Your State pension, although taxable, will by paid gross. At the conclusion of each tax year, as soon as you render your self assessment tax return, a tax computation will be made which will take all income and allowances into account and either bill you for any tax shortfall or give you a refund of any tax overpaid. It will all come out in the wash and next year your Personal Allowance will be applied in full to one pension income stream whilst the other will operate under a full basic rate deduction.
A not over satisfactory position as far as your cash flow is concerned, but the best that can be done in the circumstances.
I do hope my reply has not been too much of a disappointment to you.
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Expert:  bigduckontax replied 3 years ago.
Thank you for your support.