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Tax After Retirement

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horselady | 21:13 Fri 17th Apr 2015 | Personal Finance
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At the moment I still work 3 days in the Civil Service on what is called partial retirement, have a very small state pension and a Civil Service pension. I pay £76 from my CS pension and £84 from my CS salary per month in tax. When I retire completely in October I will fall straight under the £10,600 tax allowance, earning about £9,700 from both the pensions. What do I do about the CS pension people not taking tax from the money they pay me? Do I have to notify HMRC by filling out a form, do they carry on deducting it until next April and then HMRC refund it? Anyone know please?


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Looking at your current situation your gross income is £19,976pa (£10,888 salary, £4,512 CS pension; £4,576 State pension). Tax due on this is (19976-10600) x 20% which is £1,875. So your current tax payments of £160 per month (£1,920 pa) is a little more than you need to pay. Assuming you will only receive half a year’s salary this year as you are...
23:58 Sat 18th Apr 2015
I would wait until you leave the CS in October and then notify HMRC that your want them to adjust your tax code for the CS pension payments. There is an online form application document you can use but you have to register to correspond online so it may be easier just to write a letter
They dont normally adjust PAYE codes when you retire
so you would have to tell them

If you have two pensions ( as you have said ) you may get different PAYE codes for each one which is confusing but is intentional - they may wish to take tax off one alone.

This appears to be discretionary on their part

They lopped off 40% from one of my pensions to account for other income - actually non-income and then I got a rebate at the end of the year. and when I asked them not to do it again I got the answer: 'yeah, we're gonna !"
Question Author
Thanks both, but Peter, they shouldn't take any tax from anywhere as I won't be earning enough.
well we live in the era of RTI
real time information

[ that is a revenue buzz word for taking tax er as and when needed,]
so there is not reason why you shouldnt insist on it as well

Bear in mind - I havent used your figs but £24k going down to 11k
then I think one may not have paid all tax due by retirement time and so when one goes down to pension, there may still be tax due.

They put in a tax free amount every month ( so April and May isnt tax free and you pay whacko after that ) and your pension may exceed the tax free amount for that month in which case you would pay tax at 20% on the excess

Comes out in the wash but as you can see it is possible to do the tax calc yourself just in case the tax man is too busy .....
You also need to bear in mind that although your State pension is paid free of tax, it actually forms part of your taxable income. This means that your tax free allowance of £10,600 will be reduced by the amount of your State pension so that the tax due on it can be collected via PAYE.

When you stop work in October you will still need to consider the earnings you have accumulated between April and October. If your total income for the year (half a year's salary plus a year's payments on each of your pensions) comes to less than your adjusted tax allowance you will not be liable for any tax. This seems unlikely from the tax you are currently paying. If you give me all your figures (expected salary for the year and expected pension payments - split State and CS) I should be able to work out what you are likely to pay in the way of tax. You can then inform HMRC to adjust your tax code (for your CS pension) correctly.
Question Author
New Judge-my salary is £10,808.88 per annum and I pay £84 tax on that each month, so take home pay is around £800
CS pension is £376 per month and I pay £76 per month tax on
Then state pension is £88 per week.
I realise it will be a bit messy this year, but after next April, I won't pay any tax will I? (she says hopefully)
Not if your taxable earnings (private and state pension) are below the threshold. It lookst o me as if they will be below the threshold
Question Author
Both pensions added together amount to £9,136.92 so I think I should be OK.
Just out for some nosh, horselady. I'll come back to you with my calculations. A quick calculation for next year suggests no tax will be payable.
Bear in mind as well that if you have any savings where the interest is paid net of tax ie, tax is deducted from the interest before it is paid to you, you can ask for that interest to be paid without the tax being deducted. There are income and savings-interest limits but Google "R85" for details.
Looking at your current situation your gross income is £19,976pa (£10,888 salary, £4,512 CS pension; £4,576 State pension). Tax due on this is (19976-10600) x 20% which is £1,875. So your current tax payments of £160 per month (£1,920 pa) is a little more than you need to pay.

Assuming you will only receive half a year’s salary this year as you are stopping work in October your gross income for the year will be £14,532 (£19,976 - £5,444). Tax due on this will be £786 but you will have by then paid £960 (£160 x 6). So you will be due a tax rebate of £174 which should be returned via PAYE on your CS pension.

As I said, next year you should pay no tax. Your tax allowance should be around £6200 (maybe a little less depending on how much your state pension is increased by) but this should more than cover your CS pension. Finally, as bhg has pointed out, you will have a small amount of tax-free interest on your savings (about £500) and you will have to reclaim this at the end of the current tax year (using form R40). But this will increase to about £5,000 next year and you should then declare yourself a non-taxpayer and have your interest paid net of tax (using form R85).
Question Author
Thank you so much everyone, very informative.

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