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Where Taxpayers and Advisers Meet

Two Pensions What Tax

pushbike
Posts: 2
Joined: Fri Jul 15, 2016 4:50 am

Two Pensions What Tax

Postby pushbike » Fri Jul 15, 2016 5:25 am

Hello i have a query about my pensions,first a bit of background info
I am almost 60,and at the moment I work for the local council as a driver,I have been paying into the lgps for almost 27 years and meet the 85 year rule. I am also in receipt of a pension from my previous job as a bus driver where I was pensioned off on ill health.I have been in touch with the LGPS and had my pension forcast which is excellent for me ,so i will be receiving two pensions at 60 if i decide to leave
Pension 1 £3200 per anum (bus)
pension 2 £6600 per anum (council)
total £9800 per anum approx
I am aware that this unearned income is under the £11000 personal allowance so i will pay no income tax,however i may consider looking at some sort of part time work in the future so
My question would be how would i be taxed,
will i be taxed at 20% on both pensions ( would that then be 40%) and also taxed on my part time work.
The pension i receive at the moment------on my monthly statements my income tax is nil but i pay that tax out of my council wages each month,but i have learned that if i get two pensions then my allowance will go to the highest income.
I am really confused don't know what to do for the best any help in layman terms would be very helpful.
I can supply more info if this is needed
They say tax does not have to be taxing ,i beg to differ at the moment!!!!
Thank you

jpcentral
Posts: 924
Joined: Wed Aug 06, 2008 3:28 pm
Location: Loughborough
Contact:

Re: Two Pensions What Tax

Postby jpcentral » Fri Jul 15, 2016 8:19 am

At the end of the day, you will be taxed on your total income - Pension 1 + Pension 2 + Part Time job. These will all be added together and your personal allowance deducted to arrive at a taxable amount. This will be taxed at 20%.

Pension 1 = £3,200

Pension 2 = £6,600

Part time job = £6,000 (as an example)

Total income = £15,800

Deduct personal allowance of £11,000, leaving £4,800 taxable at 20% = £960

HMRC will normally take the easiest route and tax only one of those - probably your part time job, but you can ask HMRC to apply your tax code in different ways if you wish.

Because (presumably) your part time earnings will probably fluctuate during a year, it is unlikely that they will get it exactly right so you may end up with an over/underpayment at the year end.

If they applied a BR tax code to your part time earnings and no tax to the two pensions, you would actually have £1,200 tax deducted and you would be refunded the £240 overpayment. There are all sorts of combinations which could be used and, you probably won't take your pension or start your part time job exactly at the beginning of a tax year so there will be an interim period where it will be difficult for HMRC (or you?) to know exactly what is happening. This will settle down in the next full tax year.
John Perry
Central Business Services
Loughborough
http://www.centralbusiness.co.uk

pushbike
Posts: 2
Joined: Fri Jul 15, 2016 4:50 am

Re: Two Pensions What Tax

Postby pushbike » Fri Jul 15, 2016 10:32 am

thank you for the reply that has made me sigh with relief and helped make my decision a little easier
thank yoy once again.
tony


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