Discussion
My mum's in the process of getting the retirement ball rolling (she's an assistant headteacher so has to give a term's notice). She's 69, been deferring the State Pension until this month which she's triggered and apparently will be starting to pay out imminently in addition to her normal salary; she didn't know it would start so soon and was anticipaiting a delay. As a result I said she'd end up paying 40% tax on the state pension element in the short term, however as of August her retirement starts and teachers' pension will start and her salary will stop so the tax would even out over the course of the tax year anyway.
However, HMRC have put her on a '3LX' tax code for some reason - this means she gets just £30 TFA for this tax year and the upshot is that she got hit for a lot more tax from her salary this month. She hasn't had a payment from the State Pension yet and is getting in a bit of a tizzy about it.
Reading into it, it looks like it's an emergency tax code they've put her on becase it's the new tex year and they don't have any information (yet) for her PAYE income from the school? I've said to her that as far as I can see, she just needs to let HMRC know what her combined salary and state pension income will total and they should resinstate her full £12,750 TFA?
Have I understood this right? She's keen to have it 'sorted out'...!
However, HMRC have put her on a '3LX' tax code for some reason - this means she gets just £30 TFA for this tax year and the upshot is that she got hit for a lot more tax from her salary this month. She hasn't had a payment from the State Pension yet and is getting in a bit of a tizzy about it.
Reading into it, it looks like it's an emergency tax code they've put her on becase it's the new tex year and they don't have any information (yet) for her PAYE income from the school? I've said to her that as far as I can see, she just needs to let HMRC know what her combined salary and state pension income will total and they should resinstate her full £12,750 TFA?
Have I understood this right? She's keen to have it 'sorted out'...!
The tax free allowance is being applied against her state pension so she will receive that free of any tax ( they're estimating her state pension to be £12540 for this tax year)
Her remaining earnings from her employment will all be taxed at the basic rate of 20% and higher rate of 40% (for her earnings that fall into that bracket).
Her remaining earnings from her employment will all be taxed at the basic rate of 20% and higher rate of 40% (for her earnings that fall into that bracket).
Edited by _CrazyIvan_ on Tuesday 30th April 16:47
Ah! Ok, that makes sense. So the net will be the same - just that the tax will be against the salary rather than the SP. Got it. Her SP is higher as she's deferred it for 4 years.
I guess if she over-pays early on on her salary element they'll refund her later in the year (she is a 40% rate payer).
I guess if she over-pays early on on her salary element they'll refund her later in the year (she is a 40% rate payer).
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