A Taxing Question For The Oldies Here.

[Old_Geezer]

I was asked what seemed to be a simple question and could not answer it. As the issue will affect me some day, hopefully in the not too distant future, I thought I might ask here, especially as Google couldn't seem to match my question up with a suitable answer :-)

In today’s world we often work for a number of different employers though the course of our working lives, and thus may end up with multiple pensions all paying a little bit, but hopefully adding up to enough to live on.

When working, PAYE tends to sort the tax collection out (more or less) but what happens when retired ?

Do folk get demands from the tax man, and have to find the money to pay at the end of the year, and a hefty form to fill out to boot ? Or does the tax man demand a little from each pension provider before they send the net, even though none actually burst the personal allowance on their own ? Or does the tax man pick on one of the providers and demand all the owed tax from them ? What’s the deal here ?

Thanks.

[Arrods]

I took my occupational pension at age 62 and the provider deducted the tax. When I became eligible for my State pension, it was paid gross and the tax was deducted from my occupational pension each month. Pretty straightforward I would guess compared with your example!

[factor-fiction]

A tax code is applied to your private/employer pensions. The problem arises because state pension is not taxed at source so if any tax is due the codes need adjusting or you get asked to pay up the money due

[kloofnek]

Tax is took from an Occupational pension,the amount depends on how much State Pension you get.
I think it unfair as one has paid tax whilst paying into the OP...then one has to pay AGAIN!!!

[baza]

I have one private pension which is taxed as a PAYE sort of thing ( or pay tax until you die) and a state pension which is not taxed. Only had to fill in one form.

[kloofnek]

Forgot to say..one has a tax code just like when working.

[factor-fiction]

>"I think it unfair as one has paid tax whilst paying into the OP...then one has to pay AGAIN!!!"

Not really. Tax relief at the highest rate was given on pension contributions

[kloofnek]

Did not know that ,Factor...

[Old_Geezer]

Wow I look away and then 7 answers :-)

Thanks all.

I'm still not 100% on this. mainly I think because most folk don't have such complication.

Am I right in interpreting the answer as, the tax man asks each pension provider for a tax deduction, even though they are under the personal allowance, and then there is some kind of mop up rebate or demand at the end of the financial year ?

[factor-fiction]

No tax will be deducted once they know your total income is below the threshold. They will apportion the full personal allowance, minus an adjustment for state pension, between the OP providers. It may take up to a year to settle down though

[Old_Geezer]

"apportion the full personal allowance"
Right, got it, I think. Sounds a sensible method.

And it'll please the person who asked me since they were concerned they'd spend all the money on "basics" and then get a tax demand at the end of the year :-)

[decmangan]

I have 2 personal pensions that I draw on. I have no state pension yet as I am too young. I get two different tax codes, one for each of my personal pensions.

[jno]

I think the only to watch out for is when the compilation moves you into a higher tax bracket

[thegreens]

To ensure that you don't have an unexpected tax bill at the end of the year, you are better off taking responsibility that all the correct tax is paid. As an assumption your state pension will take up more or less all of your free pay allowance (£10k this year), therefore with every one of your other pension providers, get in touch with them and tell them to tax you with the code BR. This will ensure that the correct tax is paid.

[Peter Pedant]

SImples - your occ pension will have a PAYE code, and from what people say your state pension is taxable but is paid without tax taken off.

and so any extra tax is taken off from your occy pension

Having different PAYE codes for different incomes is common as well.

and it sort of works out at the end of the year.

I dont have any problem as I have unearned income ( shares, betting and prostitution )as well so I have always done ( and looked forward to ! ) my tax form. Why pay more tax than you need to ? Other people find this a complete pain in the ass.

IF you earn a bit of money this will be paid ( remembering not to pay NI if you are over 65 ) and may well have a different tax code.

so basically on April 3rd you have to well you know add it all up.....

[Peter Pedant]

blimey the oldies havent been taxed at all by this !

[boxtops]

HI O-G, I'm in exactly this position, and I have regular discussions with HMRC,

The position for me (and probably for others) is that in order for the State Pension to be paid to me gross of tax, the tax allowance relevant to me is applied to the largest of the occupational pensions I receive. The other (smaller) pensions are taxed at source at basic rate. At the end of each financial year, I gather together all my P60s and have another conversation with the taxman about the year's overall income. it seems to be working well for me!

[boxtops]

... and you don't have to tell the different employers anything - HMRC send them the new notices of coding at the start of each tax year (for me, anyway).

[thegreens]

don't take the risk of HMRC telling your various private pension providers-do it yourself

[boxtops]

If that's your experience, greens, it's up to you - but I keep a close eye on my tex and so far HMRC have been notifying my pension providers with no problem.