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My income lies in 4 areas;-! Clydesdale Bank Pension (net

Customer Question

My income lies in 4 areas;-
! Clydesdale Bank Pension (net £!,718.87 May to September 2016, but £1,699.27 in October ).
OAPension net £688.36
Standard Life (Insurance pay out of£16.79 net)
Rowanfern (Franchise Company) £800 net - note that £200 is deducted for tax prior to the net figure.
When without warning my Clydesdale Bank arrived in October at a figure of £1699.27 I called CB to ask where the missing (£20 almost) money had gone. During the discussion (got involved with HMRC as well) the response was bluntly that I had strayed into top bracket for tax and indeed they were looking at further impositions which would be translated as a drop of £80 from my Clydesdale 'Bank money. As I have never in the intervening timeframe changed any of my earnings I must ask how this is justified. Can you help?
Submitted: 1 month ago.
Category: Tax
Expert:  bigduckontax replied 1 month ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

Your first problem is your State Pension (SP). Although the SP is paid gross it is taxable. The usual procedure would be for HMRC to reduce the tax code on your Clydesdale pension to recover this under payment of tax and make you tax neutral at the end of the tax year. Now whilst the tax tables, which are used to derive the monthly deductions, work well enough where the earnings are relatively steady any sudden change will throw them out, particularly during a tax year and the tables will assume that the monthly change, particularly an adjustment, will be permanent.

Now at a rough estimate I make your annual income of the order of 46230. That means that 3230 will be taxed at the higher rate of 40%. Again the tables do not handle higher rates of tax very well. My advice to you would be to wait until next month when the whole shooting match should start to adjust itself and equilibrium restored, well partly.

So the first thing to do at this stage is to ensure that the tax code applied to your Clydesdale pension is correct. A small point to consider is that your spouse, if you have one and she is willing, can transfer up to 10% of her personal allowance to you. This will top slice your taxable income by 1100 per annum.

I do hope that I have been able to shed some light on the possibilities.

Customer: replied 1 month ago.
Why now? None of my income types have changed for years
Expert:  bigduckontax replied 1 month ago.

I cannot tell you, but it is not unknown for HMRC to make mistakes with tax codes and this may have happened here. Also the tax tables tend to be less efficient at higher tax bracket levels.

Expert:  bigduckontax replied 1 month ago.

Post to clear my question list.

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