You can pay too much tax if your details with HMRC are incorrect
HMRC has explained the tax rules that apply to pensioners(Image: Getty)
HMRC has outlined some important tax rules that apply to pensioners. It’s important to ensure all your information is current with the department, otherwise you risk paying an incorrect amount of tax.
A taxpayer reached out to the organisation to enquire whether their tax code or personal allowance might be impacted given their circumstances. They explained they had a full-time salary and were contributing to a pension through their employer, while also receiving pension payments from a defined benefits scheme.
Every person receives a standard personal allowance, meaning they can earn up to £12,570 each tax year without paying income tax on this sum. Once your earnings exceed this threshold, you pay 20 percent tax on your income, though this rate rises once your income crosses other thresholds.
In response 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 calculate how much tax to deduct from your income.
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You could pay excessive tax or not enough if your code is wrong. A taxpayer can locate their tax code for the current year online by logging into their personal tax account on the Government website.
Taxpayers can also view their tax code via the HMRC app or on a recent payslip. You can additionally find the crucial code on a Tax Code Notice letter from HMRC should you receive one of these letters.
If you believe your tax code is incorrect, you can have it amended. Official guidance on the Government website states: “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 advices states that the best way to update your information is by logging into your account on the gov.uk website. There you can see your employment and pension details, along with your estimated taxable income, and any workplace benefits or expenses.
You can also amend your information if anything is inaccurate. Should your tax code require changing, HMRC will then update this, and will notify both you and your employer of the revised tax code within 15 working days.
After the new tax code has been put in place, it will appear on your next or subsequent payslip if you receive monthly payments. If you are paid weekly, it will appear on your third payslip after it has been implemented.