Pension and income tax rates

[kalujo123]

Hello I'm trying to find out some info for my father. Haven't a clue about pensions etc.

 

He receives a private pension from his previous employer which currently pays around £400 per month but has tax deducted at 40 percent. Also currently is employed earning around £20k per year and taxed at 20 percent. Is it correct that his private pension is taxed at 40 percent? He is not at state pension age yet.

I'm confused as I thought everyone had tax bracket earning limits before they were deducted at 40 percent ie above £36k or something, am I right or are private pensions treated differently.

 

 

Many thanks for your help

[blondebubbles]

Is that the only income he has?

 

The 40% tax bracket kicks in at £41,865.

 

https://www.gov.uk/income-tax-rates/current-rates-and-allowances

 

What tax code is being used for his pension D0? Any for his employment? 1000L?

[honeybee13]

Hello there.

 

BB is the expert, but to answer one of your questions, pensions are just treated as earned income and added to other income to calculate what tax rate is charged on them.

 

HB

[kalujo123]

Hi thanks for the quick replies

 

These 2 are the only income he has and he does not earn above the £41k that bb has said. Unfortunately he is away at work at the moment and not home until Friday for me to find out about his tax codes etc. would they have just placed the 40 percent tax in his pension by default as he has never questioned anything with Hmrc. If there is an error would he be entitled to receive anything back from them.

 

Once again thank you very much

[honeybee13]

Hello again.

 

Can you tell us why you think the pension is taxed at 40% please? Is there anything you can quote us verbatim that HMRC said?

 

HB

[kalujo123]

Hi thank you HB

 

Just checked with my mother and she says that he gets taxed at 40 percent as apparently there is no tax code present? Does that make any sense to you

[kalujo123]

It showed as no code on a yearly statement, but they used to be monthly

[honeybee13]

No code is odd, BB may know.

 

HB

[goodatresearch]

Sounds like a mistake to me. My partner works full time but also receives a pension. The pension is taxed at 20% automatically. I'd give them a ring and ask for an explanation,

[blondebubbles]

What do you mean by yearly statement? Do you mean his P60 for last year from the pension provider? I havent ever seen a P60 without a tax code.

 

He should also have received a coding notice from HMRC.

 

The easiest and quickest thing to do would be for him to call the tax office as we can only make guesses here without the full information. HMRC will be able to see the tax codes operated and why and change them if need be.