HMRC has clarified some of the tax rules that apply to pensioners. It’s important to check all your details are up to date with the department, or you could pay the wrong amount of tax.
A taxpayer contacted the group to ask if their tax code or personal allowance could be affected given their situation. They said they had a full-time income and were making pension contributions through their employment, while receiving pension payments from defined benefits scheme.
Each person gets a standard personal allowance, meaning they can earn up to £12,570 each tax year without paying income tax on this amount, HMRC says. Once your earnings move over this threshold, you pay the tax on 20 percent on your income, although this rate can increase as your income moves higher.
Responding to the person, HMRC said: “Your main tax code may be affected if your personal allowance has been split between your full time income and pension.” Your tax code is used by your employer or pension provider to work out how much tax to deduct from your income.
You can pay too much tax or not enough if you are on the wrong code. A person can find their tax code for the current year online, by signing into their personal tax account on the Government website.
Taxpayers can also view their tax code through the HMRC app or on a recent payslip. You can also find the important code on a Tax Code Notice letter from HMRC should you be sent one of these letters.
If you think your tax code is wrong, you can get it changed. Guidance on the Government website explains: “If your tax code is wrong, it’s usually because HMRC has incorrect or missing information. To correct your tax code, check and update the details HMRC has about you.”
The fastest way for you to update your details is by logging into your account on the gov.uk website. Here you can check your employment and pension details, as well as your estimate for your taxable income, and any company benefits or expenses.
You can also update your details if anything is incorrect. If your tax code needs to be changed, HMRC will update this for you, and will inform you and your employer of the new tax code, within 15 working days.
Once the new tax code has been applied, it will show on your next or the following payslip if you are paid monthly. If you are paid on a weekly basis, it will show on your third payslip after it has been applied.
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