Tax On Pension

[Budlet]

I was astonished to see Mum has paid £1189 tax on a £5946 pension. Her P60 gives her tax code as BR. Do you not have the personal allowance on a pension? This is her only income.

[Fitzer]

As the state pension isn't taxed all tax over your personal allowance is taken from any private pension you receive (not sure what happens if you don't have a private pension to take it from). So what she needs to do is look at her total income, HMRC will have sent a form explaining the tax code showing this.

[MargoTester]

https://www.litrg.org.uk/tax-guides/pensioners/tax-code-problems-retirement
I'm not sure if this will be of any help. I think she must be on the wrong tax code

[Chinajan]

If it is indeed her sole income then a call to HMRC is needed here. They are taxing this income at basic rate ie no personal allowance. As the previous respondent stated, this is what happens when your allowances are given against another income.
Is your Mum able to call and speak to them? If she'd rather you help, she can go through the initial security questions then tell them you have her authority to speak about these matters for her.
0300 200 3300 quoting her NI number.

[TonyV]

If pension is provided by private company, they will take tax at source, you will need to make a claim with HMRC to claim tax taken. Below is current tax allowance.

https://www.gov.uk/income-tax-rates

[New Judge]

Yes the above answers seem correct. She is having all her income taxed at the basic rate (20%) with no personal allowance.

There has been talk in earlier answers of the "State Pension". I assume this is not your Mum's State Pension. I make that assumption because the State Pension is paid free of tax (although it forms part of your taxable income). I have never heard of anybody having deductions made from their State pension. If this is a work pension then the employer (or their pensions administrators) need to be advised of a tax code for your Mum or they will deduct tax at the basic rate. She needs to get on to the tax office and get them to provide a tax code to the employers.

You say you have discovered this from your Mum's P60. P60s are not issued until after the end of the financial year (April 5th). Is this a previous year's income you are talking about?

[Budlet]

New Judge - it's a pension she has been receiving for the last five years since my father died. It was a P60 dated year end 5 April 2018.

[grumpy01]

Can we assume from this then Budlet that your Mum has not yet reached state pension age.

[Prudie]

So for the last 5 years she has had no income at all apart from this £5946? Is she below pensionable age herself?

[Budlet]

Mum is 82

[Budlet]

It says tax code BR at the bottom of the P60

[Prudie]

Then is she not getting state pension as well?

[Budlet]

She has no other income apart from her state pension

[fiction-factory]

She should have received notice of her tax codes each year and these would have set out why a BR code had been allocated. Maybe she didn't study/understand the letter.
This can be sorted out over the phone with HMRC but you need to reearch the best time to ring to avoid queues- i think the HMRC website gives suggested best times. Or to avoid DP issues if she'd rather not ring, a quick letter explaining that it's he only source of income (if it is- maybe you have overlooked state pension but that alone should still not result in a BR code here).
If the BR code has been in place for a while there should be a hefty rebate soon

[grumpy01]

From what you have said Budlet you need to ring HMRC PDQ.

[fiction-factory]

I've just seen that she does get state pendion, so there may be some tax due on this as state pension forms part of taxable income. But her basic personal allowance should only have been reduced by the value of her state pension- so her personal allowance should be around £4500 giving her tax code of 450L.(actual figure depends on her pension - i doubt she's be getting pension credit too)

[Budlet]

Thanks very much everyone for your answers. It was only picked up because she wanted me to sort out a Power of Attorney for her and had to give proof of income. Hopefully she will get a nice rebate!

[Peter Pedant]

thx for the litr ref
and there is this in it

One of the main causes for tax code problems is that the Department for Work and Pensions (DWP) do not operate Pay As You Earn (PAYE) on your state pension.

I dont get a p60 for my OAP
wh is kinda a problem when I fill out a tax form but I now understand why ( no tax pd) [ and never will]

so I have to say I dont understand what is going on to your mum ( extra income most likely)

[pansypotter]

Im in the same boat, I get a private pension from my late husband works and have to pay the basic rate (BR) tax on it.

[TonyV]

Pansy as said before pension company doesn't know what other income you have so you have to claim tax back depending on your total income.

[pansypotter]

Ive just checked my tax documents and you do get a personal allowance on a private pension paying the BR.