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Pay slips and pension tax

Discussion in 'Retirement' started by pauljoecoe, Sep 28, 2020.

  1. pauljoecoe

    pauljoecoe Occasional commenter

    Just received my first pension payment. However, it is a little confused as it looks as though it has been taxed (being September I won't be needing to pay tax this tax year - I have not been earning in the UK fir the last 3 years)

    To add to the confusion I have received a letter from TP notifying me of a tax code change from next month resulting in a £76 tax refund. The Tax code is 1204L.

    Questions:

    1. Do you get a pension 'pay slip' through the post? I haven't seen one. It may help to explain what they have done.

    2. Why tax code of 1204L. To my mind that means a lower tax threshold than standard (1250L), How does that create a tax refund? £76 per month refund will equal more than I seem to have had deducted from my first payment. Are there other deductions?
     
  2. ikon66

    ikon66 Occasional commenter

    To answer Q1 if you go into your TP page you can view your Payslips
     
    stopwatch likes this.
  3. diddydave

    diddydave Lead commenter

    Yes that is a strange code, they use codes lower than 1250 when they use it to reclaim tax that should have been paid in previous years - only way to understand that is to ask HMRC.

    The issue regarding the first pay and subsequent refund is all to do with you not having paid tax from April until now. I presume TP didn't get the tax code in time to apply it to your first payment and so taxed all of it at 20%. I believe the refund they have told you about isn't EVERY month from now on, just for next month. Fairly easy to check this...
    • multiply your monthly gross pension by 7(up to March for this financial year)
    • deduct the 12040 (tax allowance)
    • multiply by 20% (annual tax bill)
    • divide by 7 (months to pay the tax bill - including this months)
    Then the difference between that figure and the tax you paid this month should be £76
     
  4. pauljoecoe

    pauljoecoe Occasional commenter

    Ah...thanks. I was looking in secure messages.

    So that's a little clearer. Tax code for Sept was 1250L M1 (not sure what M1 means).
    So £76 was taken off.
    October tax code changed to TAX RFN 1204L £76 refund. Not sure I understand how that code works.
    Will be interesting to see what happens in November.

    Edit: Just noticed - my Gross pay for September was £228 less than Octobers will be. Octobers is what I expected. Any ideas why September would be less?
     
  5. diddydave

    diddydave Lead commenter

    Presumably you picked the September date which wasn't quite a full month. They pay you to the day before your birthdate, in the first month you pick the date so you get the pro-rata amount for that month.
    So if you birth day as 15th but you wanted your retirement to start on the 1st of a month you'd get a half-month payment the first time and then you would be paid on the 14th of every month thereafter.
     
  6. pauljoecoe

    pauljoecoe Occasional commenter

    That makes sense however doesn't match up at all:

    Gross pay in Sept was less than Octobers will be (see previous post) but either way 7 months of that would be well less than 12040 so no charge at all.. If it was based on 12 months then it would be nearer at £84 but still not correct. Still, they are refunding the £76 so not worth worrying about. Just need to understand why Septembers Gross pay was £228 less than expected and Octobers appears to be correct.
     
  7. diddydave

    diddydave Lead commenter

    Key thing is to check that you pay the right amount of tax over the year.

    That calculation is just: (Income to end of March 2021 - £12,500) * 20%.

    The tax aspect of pensions, just like many new jobs, can take a bit of time to get right. So long as you are not in desperate need of it in the next month or two it should settle down - just keeping an eye on whether you are paying the right amount by end of March should suffice.
     
    border_walker likes this.
  8. pauljoecoe

    pauljoecoe Occasional commenter

    I chose to retire from September (1st I assume?) My birthday is 29th so payment is on 28th. That's only 2/3 days? Thats not £228 difference. (Wish I was getting that!)
     
  9. border_walker

    border_walker Lead commenter

    Have you logged onto TPS site, you will see your present and next months payslip. I thing that this might solve your issues. If not contact them or tax office.
     

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