just received a PAYE Coding notice

by **smithy73** on Tue Jan 24, 2012 7:06 pm

hi,
i have a query and thought id ask you knowledgable peeps before ringing the tax office.

i am 38 years old and retired through ill health in 2003 from the job i had. i receive an ill health civil service pension of which approx 9900 pounds is taxable (going by my form p60 end of year certificate of 2 years ago.) this is my only source of income. i have 13 thousand pounds in investment in a gilt and ftse tracker and £2500 left in a cash isa. i was on tax code 497l.

this morning i received a PAYE Coding notice Tax Code for the year 2012-2013 which states "We have asked CIVIL SERVICE PENSIONS to use code BR for this year, which means you will pay tax at 20% on your CIVIL SERVICE income."

my circumstances have not changed for the past 2 years.
i am wondering if the law has changed or why indeed my tax code has changed to the basic rate?
thankyou in advance for any answers. if you need further details, ill be happy to supply.

by **smithy73** on Tue Jan 24, 2012 7:26 pm

just to add (sorry i couldnt edit original), not sure if its relevant however, on the form P60 mentioned i only paid 672 pounds income tax total for year on the 9900 taxable earnings with tax code 647L.

by **Peter D** on Tue Jan 24, 2012 7:58 pm

Looks like they have made a mistake. Write to them and ask them to revisit the coding. Are you recieving and benetifs form anywhere. Regards Peter

by **smithy73** on Tue Jan 24, 2012 8:02 pm

no i receive no benefitsor income from elsewhere. i applied for job seekers but got denied because of the pension.

by **JRG** on Wed Jan 25, 2012 3:36 pm

Note: Total Earnings = Your gross earnings, BEFORE deduction of Personal Allowance.
Taxable Earnings = Your net earnings, AFTER deduction of Personal Allowance.

For an Income Tax bill of £672 your Taxable Earnings would be £3,360 and your Total Earnings would be £9,835 (i.e. £3,360 + £6,475).

However, you state that the "approx. £9,900" is your Taxable Earnings, which presumes that your Personal Allowance has already been deducted. If this is the case then the BR Tax Code is correct.

by **smithy73** on Wed Jan 25, 2012 4:23 pm

i am confused. if the 647L tax code where i had a personal allowance which i think the 647 refers to is correct and i paid £672 from the £9838-30 taxable earnings, why am i now losing my personal allowance as surely thats what the BR code means. this is my only income and my only pension.

by **smithy73** on Wed Jan 25, 2012 5:25 pm

have just looked at older other documents referring to my old salary and it does indeed mention salary less personal allowance is taxable salary so i think my civil service p60 is confusing things.
on the reverse of my P60 was the following info for tax year ending 5th April 2011 which i found.
my gross pension is £10161.45 FOR 2011/12 . i can find no reference anywhere of a larger amount. my current tax code is 747L AND gross pay is £846.79 with tax of £44.80 giving net pay of £801.99.

sorry for all the confusion. can you tell from this if i should be on BR tax code?

by **JRG** on Thu Jan 26, 2012 1:46 am

From your response I'm assuming your 'approx. £9,900' is your Gross Pension for 2010-11, in which case the Income Tax of £672 will be correct.

The figures on the reverse of your 2010-11 P60 show the gross amount you will be paid in 2011-12.

If your Gross Pension is £10,161.45, and your Personal Allowance is £7,475, then your Taxable Pension is £2,686 (ignoring the pence) and the Income Tax payable is £537.20. For each month you should get a Gross Pension of £846.79 and pay Income Tax of £44.80. In some months the figures may be slightly different, to agree with the annual totals.

You should ask both HMRC, and your Civil Service pension provider, why the Tax Code is being changed for 2012-13. Usually, the BR Tax Code is applied to a second employment, or to a pension if still in employment. If the BR Tax Code is applied, you will have to reclaim overpaid Income Tax from HMRC.