Tax code experts ?

[williamalex1]

Just noticed my tax code has been getting lower over the last few years, despite transferring 10% of my wife's allowance over to mine.
In 2019 it was S631m, 2020 = S600m, 2021 = S589m, 2022 = S558m.

According to HMRC, it's because of the yearly increases in my state pension, is this correct?
The tax is paid on my private pension seems like giving with one hand and taking away with the other.

 

[rulefan]

Just noticed my tax code has been getting lower over the last few years, despite transferring 10% of my wife's allowance over to mine.
In 2019 it was S631m, 2020 = S600m, 2021 = S589m, 2022 = S558m.

According to HMRC, it's because of the yearly increases in my state pension, is this correct?
The tax is paid on my private pension seems like giving with one hand and taking away with the other.

The tax on your state pension is taken together with the tax taken from your private pension. Your state pension is not taxed at source so as your state pension goes up your code goes down. This means that to compensate extra tax is taken from your private income.

If your total income (ie both pensions and any other income) was sufficiently low you would not pay income tax on your income.

 

[doublebogey7]

Just noticed my tax code has been getting lower over the last few years, despite transferring 10% of my wife's allowance over to mine.
In 2019 it was S631m, 2020 = S600m, 2021 = S589m, 2022 = S558m.

According to HMRC, it's because of the yearly increases in my state pension, is this correct?
The tax is paid on my private pension seems like giving with one hand and taking away with the other.

With the government no longer increasing personal allowances, more will be taken up by the increased state pension leaving less available to set against private pensions. So it would seem that HMRC are correct.

 

[williamalex1]

The tax on your state pension is taken together with the tax taken from your private pension. Your state pension is not taxed at source so as your state pension goes up your code goes down. This means that to compensate extra tax is taken from your private income.

Yes , but people without a private pension will get the full benefit of the state pension increase, I won't

 

[rulefan]

Yes , but people without a private pension will get the full benefit of the state pension increase, I won't

Only if their total income is below the threshold. You will get a proportion of the increase in the same way you would get a proportion of any increase in your private pension.
It's only taxed at your marginal rate. But isn't this what income tax is all about?

 

[williamalex1]

Only if their total income is below the threshold. You will get a proportion of the increase in the same way you would get a proportion of any increase in your private pension.
It's only taxed at your marginal rate. But isn't this what income tax is all about?

Sadly yes, I get a reduced state pension because I was opted out .
My wife gets the full state pension and pays no tax on it.

 

[jim8flog]

To the best of my knowledge when you look at a notice of coding the 'item' they put the allowance against first is always state pension this is simply because the state pension is never higher then the personal allowance and there is no method of taxing a state pension at source.

This is shown by your tax allowance less the state pension. Leaving a tax free amount

State pension always goes up but allowance does not so the tax free amount to apply to other sources reduces.

 

[doublebogey7]

Yes , but people without a private pension will get the full benefit of the state pension increase, I won't

Remember though that those paying into a private pension did so tax free.

 

[williamalex1]

Remember though that those paying into a private pension did so tax free.

I didn't realise that, thank you

 

[jim8flog]

Yes , but people without a private pension will get the full benefit of the state pension increase, I won't

This is incorrect in part, having a private and or company pension does not stop a person from getting the appropriate increases in state pension.

 

[jim8flog]

Remember though that those paying into a private pension did so tax free.

Also people drawing their pensions had the option of taking some it as a lump sum which was also tax free.

 

[Crazyface]

My code is all up the swanny. I've had a letter off HMRC, but cannot understand a word of it. Still, it will be a nice cheque when they sort it in April.

 

[Deleted member 1147]

My code is all up the swanny. I've had a letter off HMRC, but cannot understand a word of it. Still, it will be a nice cheque when they sort it in April.

If you set up a personal tax account, you can amend it, if you believe it’s wrong.

 

[williamalex1]

My code is all up the swanny. I've had a letter off HMRC, but cannot understand a word of it. Still, it will be a nice cheque when they sort it in April.

Way back when I was in a resident band through the books my tax code was reduced. I seem to remember paying something like? 9/10th tax because I was also working full-time.
The good news was I forgot to inform HMRC when I stopped the residency for nearly a year, then got a hefty rebate.