Retired Tax

Hi why have HMRC used a full years SP when I will not be receiving it in this my first year of retirement. I will receive at least 2000 pounds less than a full pension. Thanks

I'm not HMRC but I can hopefully provide an answer. I am presuming you are referring to your tax code and state pension. Although the full amount (as if you received it for the full year) will be in your code, because the code is only used for part of the year it won't actually tax you as if you received the full amount. The reason is because of how PAYE works - on an annual basis but apportioned (weekly, monthly or however often you're paid). So say the actual pension you receive is £9,000 over 9 months. If they put that figure into your code and your private pension is paid monthly then you'd underpay as it would calculate it as 9000/12. So they need to put the full yearly amount of £12,000 in but because it would only operate for 9 months, it would only take account of 9/12ths of the £12,000 so would only tax you on the right amount. State pension is taxed on accruals btw and there are 13 four week periods in a year. Queries about SP amount for tax purposes pop up regularly here and I've noticed those tend to be reoccurring areas of confusion. Hope you enjoy your retirement!

Thank you that has really helped me understand. I hope it helps others to . Thanks again.

Hi

When the tax code including the State Pension is issued, it will be on an emergency basis.
This means that you will pay tax on 1/12 of the amount in the code each month from now until the end of the year.
It will not backdate to collect amounts for previous months.

Thank you

Thanks. Hubby is looking confused.