State Pension - Income tax

by **Barum** on Wed Sep 01, 2010 3:40 pm

I am in receipt of a private pension. I am due to get my state pension in October 2010. The state pension is paid every four weeks. Sometimes (about 2 to 3 times a year)you get two pensions in one calendar month. My private pension is paid calendar monthly. I know that my private pension providers will deduct tax due on my state pension. If they add my gross annual private pension to my annual state pension, deduct my allowance of 9490, then deduct 20% tax..then divide by 12....I can see that this would work out fine. Can anybody confirm that this is the method they use ?
The fact that you get 13 state pensions a year and 12 private pensions a year would be very confusing if they taxed me on a monthly basis . My monthly income would vary throughout the year. At present I know my monthly income and can budget accordingly

Thankyou

by **robbob** on Wed Sep 01, 2010 5:14 pm

Hello Barum

And they say tax doesn't have to be taxing - just a shame it is.

The revenue work out your annual state pension entitlement as per figures supplied by the DWP - this will probably be calculated on a daily rate mutiplied by days in the year.
90% of the time this is an actual figure but sometimes they use estimated amounts if the actual info is not forthcoming from DWP.
I would just take the state pension weekly amount notified near the start of the tax year divide by seven and multiply by 365.If this figure is similar to the amount quoted on your coding notice everything is ok.Obviously if you are due to receive an in year increase this will need adjusting for but this is not normal.

It doesn't matter if your private pension pays 4 weekly or monthly as long as the annual pension amount is correct - the amounts are split over the tax year pro rata based on the pay period for your private pension which will be monthly.

Unfortunately this is all a little tricky to explain in writing - let me know if you have any further questions