A question for retired members.

Post by **windermeredave** » 12 Aug 2016, 11:14

I am coming up to retirement age and I have a few questions regarding tax.
(1) How long is it before you get a new tax code?
(2) are you taxed on your RM pension, state pension or both?
(3) I have done my calculations and I work out should be paying around £12-13 a week. or £59 a month on my RM pension. would this kick in immediately. or would i be paying normal tax till the end of the tax year?

Post by **baldrick** » 12 Aug 2016, 17:15

I can't remember what happened about my tax code - I retired from RM 3 years ago.
I was 65 last month, and received my first State Pension payment on 4 weeks after my 65th birthday. It is paid every 4 weeks after that. I wasn't taxed on the state pension. I thought I would be, so I don't know whether that is a mistake.
You would still be paying the same rate of tax on your RM pension (20% standard rate) if you are over the Lower Earnings Level in the tax year. I don't remember how much the LEL is for2016/17, I think it's about £12k.

Post by **RobertT** » 12 Aug 2016, 18:19

baldrick wrote:I can't remember what happened about my tax code - I retired from RM 3 years ago.
I was 65 last month, and received my first State Pension payment on 4 weeks after my 65th birthday. It is paid every 4 weeks after that. I wasn't taxed on the state pension. I thought I would be, so I don't know whether that is a mistake.
You would still be paying the same rate of tax on your RM pension (20% standard rate) if you are over the Lower Earnings Level in the tax year. I don't remember how much the LEL is for2016/17, I think it's about £12k.

The LEL relates to when your earnings start to count as far as National Insurance is concerned and is currently £5,824. But as you don’t pay NIC’s on pension payments, that’s irrelevant.

The Personal Tax Allowance is what’s used for income tax and for this financial year it’s £11,000.

Post by **windermeredave** » 12 Aug 2016, 19:18

baldrick wrote:I can't remember what happened about my tax code - I retired from RM 3 years ago.
I was 65 last month, and received my first State Pension payment on 4 weeks after my 65th birthday. It is paid every 4 weeks after that. I wasn't taxed on the state pension. I thought I would be, so I don't know whether that is a mistake.
You would still be paying the same rate of tax on your RM pension (20% standard rate) if you are over the Lower Earnings Level in the tax year. I don't remember how much the LEL is for2016/17, I think it's about £12k.

Well if your income is more than 11k you should be paying tax on anything over that. I`m really not sure how HMRC work it out, maybe they will stop if off this months RM pension.
As for me, I`m at a loss to understand, how it works out. retiring half way through the tax year. a long way before i reach the 11k threshold. I guess they just calculate it accordingly . i really don`t want them taking 20% of my entire monthly pensions when I finish.

Post by **baldrick** » 13 Aug 2016, 06:52

windermeredave wrote:
baldrick wrote:I can't remember what happened about my tax code - I retired from RM 3 years ago.
I was 65 last month, and received my first State Pension payment on 4 weeks after my 65th birthday. It is paid every 4 weeks after that. I wasn't taxed on the state pension. I thought I would be, so I don't know whether that is a mistake.
You would still be paying the same rate of tax on your RM pension (20% standard rate) if you are over the Lower Earnings Level in the tax year. I don't remember how much the LEL is for2016/17, I think it's about £12k.
Well if your income is more than 11k you should be paying tax on anything over that. I`m really not sure how HMRC work it out, maybe they will stop if off this months RM pension.
As for me, I`m at a loss to understand, how it works out. retiring half way through the tax year. a long way before i reach the 11k threshold. I guess they just calculate it accordingly . i really don`t want them taking 20% of my entire monthly pensions when I finish.

Yes I pay tax on my RM pension, so maybe they will take it from that. I did expect to pay tax on the state pension as I get over the LEL with my RM pension.
Unfortunately if your pay and pensions in the tax year are likely to be over the LEL you will be paying 20% tax.

Post by **windermeredave** » 14 Aug 2016, 11:55

My state pension is £134.69p Baldrick what you getting?

Post by **baldrick** » 18 Aug 2016, 07:58

windermeredave wrote:My state pension is £134.69p Baldrick what you getting?

£135.35 pw.
btw I found my tax code statement for 2016/17, from HMRC which was issued on 24 July, 3 weeks after I reached 65, and which I received 2 or 3 days before the first pension payment went into my bank account. My tax code is now 177L X which replaces 88 1L, which apparently means that my tax-free amount for this year is £1779.

Post by **windermeredave** » 07 Sep 2016, 19:34

So here we are. I passed my 65th birthday at the end of August, I have decided to continue working until Christmas for some extra funds.
Today I got my new tax code , it is as follows.
personal allowance. £11.000
flat rate job expenses £120.00
total.£11.120

Less state pension £7003.00
TOTAL TAX FREE AMOUNT £4117.00

So in 5 months of the tax year my allowance as dropped by by a whopping £7000. (£4117 divided by 30 remaining weeks of the tax year equates to around £133 a week tax free. almost all my state pension. so 20% of my entire salary is going out on tax)
Waiting to get my wage slip tomorrw but I am anticipating a tax deduction of something between £90-£100.

I already called them and they assured me it was correct. I`m no expert but how the hell can it be?

Post by **Fatboyslim** » 07 Sep 2016, 20:53

Yes it's right. You don't pay tax on state pension. So that comes off your tax relief.

Post by **TrueBlueTerrier** » 08 Sep 2016, 15:22

The amount you earn before paying tax hasn't changed, but the way they take it has. Basically you should pay tax on wages and pension added together. What they have done is take your pension from the tax free amount, leaving you with the amount you can earn from employment before paying tax.

You are paying more tax because you are earning more. Wage + Pension - Tax.

The good news is that they probably have worked everything out based on you working the whole tax year (this is the usual way they do it), so when you do retire, you will probably be paying too much tax and will get a rebate.

deltaforce · Post by **deltaforce** » 09 Sep 2016, 18:10

One bonus is when you reach state pension age you cease paying nat ins..

Post by **nataddick** » 09 Sep 2016, 22:21

Not paying any N.I. after State Retirement Age coupled with no more RMPP contributions after NRA 65 has certainly made it more attractive for colleagues to reduce their hours and plod on for a few years part-time until they are ready to hang up their boots ! I will do the same unless things drastically change.