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bigduckontax, Accountant
Category: Tax
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unpaid tax ? from forces pension

Customer Question

Hi, I recently left the armed forces serving 23 years man and boy. I recently was told I have a tax debt of £1500 pounds , which can only be that my monthly pension.. I am a bit unsure what to do and why this has happened. any help would be appreciated . ? thanks stuart 

extra info.  i left the forces april 2012.

my pension goes into my bank account each month.

 someone told me a while back there husband had this problem when he left the army and ended up not having to pay this tax bill for some reason ..all the info i got from them was .they filled out a form ..

Submitted: 4 years ago.
Category: Tax
Expert:  bigduckontax replied 4 years ago.

Hello, I'm Keith an ex RAPC and AGC(SPS) Major, and happy to help you with your question.


When you were discharged the APC would have issued you with a P45, the Income Tax (IT) form for job leavers nationwide. This you would normally give to your next employer or the Job Centre if you were unemployed so that they can carry on the PAYE process. The Job Centre in their turn would issue you with a P45(U) if you got a job and come off Job Seeker's Allowance. This entire process enables each payer to operate the correct tax code number to make your income tax neutral at the end of each tax year. There is one snag, however, Job Seeker's Allowance is a taxable benefit, but no tax is deducted at souirce by Job Centres and you receive it with no deductions. Your Army Pension would be taxed at zero code rate unless the paying agency is aware of a different tax code. A new employer will put you on an emergency code on a month one basis until they are notified by their own PAYE tax office of some other code to use. This emergency code is the annual personal allowance for Income Tax. Now if the pension payer and an employer are both operating a code up in the 900s the too little tax will be deducted leaving you with a tax bill at the end of the year. I suspect that this may be what has happened and two income payers both operating PAYE are using the same code, one of which is incorrect.


Your solution is to check with your own tax office, for starters use the office who told you that an underpayment had occurred, and ask for correct tax codes to be issued to your employer and the pension payer. HMRC normally collect underpaid tax below GBP 3000 by reducing your tax code in the following years to correct the position so you don't have to make a big settlement payment.


Please don't hesitate to come back to me if you have some more information you did not mention in your question.