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Where Taxpayers and Advisers Meet

“K” code and pension query

Afonso
Posts:2
Joined:Tue Feb 16, 2021 3:41 pm
“K” code and pension query

Postby Afonso » Tue Feb 16, 2021 3:50 pm

I hope I’m posting in the correct forum.

I write on behalf of my great-uncle who is approaching 85.

My uncle’s taxable income is made up of the state pension and a small annuity. In the 2021-22 financial year his state pension will amount to £17,514 and the annuity is £6724. His income from interest on savings is now too small to be taxed.

The state pension exceeds my uncle’s personal allowance of £12570 so the difference of £4944 is added to the annuity to give a taxable figure of £11667. Tax is paid to HMRC by his pension firm at the basic rate of 20%.

My uncle’s tax code for 2020-21 was K478. His annuity was paid at £368.71 per month after tax. How much will his net monthly annuity payment be when K493 is applied?

The reason for my query is the pension company has made a hash of paying the annuity on time and taxed correctly for several months. My uncle’s next-of-kin has struggled with the issue by phone and letter but my uncle still doesn’t know when to expect a payment and how much. How the firm will deal with the new code is anyone’s guess. A formal complain to the pensions ombudsman looks probable.

Thank you for any help.

Afonso

D&C
Posts:52
Joined:Mon Nov 25, 2019 11:35 pm

Re: “K” code and pension query

Postby D&C » Tue Feb 16, 2021 4:34 pm

Ignoring the interest, which is presumably small enough to all be taxed at 0%, then he has remaining taxable income of £24,238

After the Personal Allowance it leaves £11,668 to be taxed at 20%.

Total tax due = £2,333.60 (£194.46/month)

His PAYE pension is £6,724 (£560.33/month).

His net PAYE pension payment should therefore be £365.87 (£560.33 - £194.46).

Tax code K493 should produce the same outcome (to within a few pence at least).

Afonso
Posts:2
Joined:Tue Feb 16, 2021 3:41 pm

Re: “K” code and pension query

Postby Afonso » Tue Feb 16, 2021 4:51 pm

Thank you for such a very rapid reply. :) I’ll pass it on to my uncle’s immediate family who deal with all his financial matters.

Regards,

Afonso


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