Baffled by first pension payment and tax deducted

[reallymadwoman]

Just downloaded my first payslip for my new ill-health pension of around £55 per week, less than £3000 pa, backdated for 6 months, and it shows tax deducted for the year so far of over £2000. They're apparently using tax code 1060L. I've basically been left with £547 for the whole year, barely worth the effort of claiming it and certainly not worth paying for in the first place.

 

My only other taxable income is contribution-based ESA, support group, which is less than £6000 pa.

 

Obviously I shouldn't be paying tax at all, which the pension payer has no way of knowing, but even if I was paying at the highest rate, surely this is far too much or have the Tories started hammering pensioners as well now?

 

Who do I contact to query this - the pension payer or HMRC? I currently do a self-assessment for tax (even though it always ends up as nil) because I have a property which I let, but not at a profit.

[obiter dictum]

My own opinion will be HMRC as it is they who set your current tax code, and amend it when necessary

[sillygirl1]

1060L is the current tax code for people who would earn over £10,060 per annum. As you are earning less get hold of them and let them know. They should be able to amend it fairly easily.

[blondebubbles]

Yeah but say the tax code used is apparently 1060L, do you have paperwork that confirms that?

 

Doesn't sound like that's the code that is being operated.

[reallymadwoman]

Payslip clearly says tax code is 1060L. I wonder if they've assumed that all the back pay is actually the regular payment and therefore the annual 'salary' is 12x that? Anyway, I still need something with a simple explanation of how much I'm getting to copy to DWP so I need to phone the pensions people anyway. I'll phone HMRC if that doesn't help.

[blondebubbles]

Payslip clearly says tax code is 1060L. I wonder if they've assumed that all the back pay is actually the regular payment and therefore the annual 'salary' is 12x that? Anyway, I still need something with a simple explanation of how much I'm getting to copy to DWP so I need to phone the pensions people anyway. I'll phone HMRC if that doesn't help.

 

Sorry I missed the part about backdated pay. However if payment was backdated for 6months and is normally £3000 per annum then that would be £1500 so a tax deduction of £2000 would be impossible.

[reallymadwoman]

Finally got some more information from the pension provider (scheme is operated by our good friend Capita!).

 

My pension was actually backdated to 6 months before the date of the earliest medical evidence I submitted and is therefore being paid from September 2013 so rather more back pay than I thought - I initially got half a dozen payments of various amounts with no payslip or explanation, so assumed it was all to do with the lump sum payment.

 

Does anyone know if the payments will all be allocated to this tax year, which would put me over my personal allowance, or if I can allocate the back pay to the previous years and so not pay tax on it? It's probably not much so I don't really mind either way especially as it's a bit of a windfall, but I do need to do my tax return for last year and at the moment don't know if I need to put that in or not.

 

As an aside, I chucked in a copy of the relevant bits of my ESA assessment at the last minute thinking it couldn't hurt. If I hadn't done that, it would only have been 6 months back pay, so thanks ATOS!

[honeybee13]

Hello there.

 

Other people know more about tax than I do, but I think money is taxed in the year it's paid, RMW. Good news about the windfall though.

 

HB

[reallymadwoman]

It seems it will all be taxed this year. Shame the tax man is going to profit from my ill health, and it does seem rather unfair that if you're owed backpay for a previous tax year you end up paying more tax on it than if it had been paid on time, but then, as my granddad used to say, the tax man always wins.