Tax code

[DustyLee123]

My elderly DF has just had a very small tax bill, and had his tax code changed temporarily. He just gets his old age pension and a private pension.
He’s asked me to check his tax code, but are there any reductions he could get, anything I should be asking for?

The HMRC website is helpful for explaining tax codes and checking they are correct.

The only reduction I've come across for older people is the marriage allowance, but I think one of the couple has to have been born before 1935?

No, he’s on his own now.

He’s got the 25% reduction on council tax, but I don’t think he’s entitled to anything else with his two pensions. But he gets all het up about others getting benefits, then I have to listen to his ranting!

His tax code seems low to me. I don’t want to go into getting a Gateway code etc, so I might just ring the tax office when I’m there one day.

What other benefits are they getting that he'd be entitled to? Does he get Attendance Allowance if he's eligible for it? Anything else like the free bus pass (I know this one differs depending on area)?

If he's paying tax on income he's above the limit for pension credit.

Could be worth checking he's getting other discounts he's entitled to - everything from haircuts to fish and chips seems to have a senior citizen discount! He should get free prescriptions automatically based on his date of birth.

He doesn’t use the bus, so he doesn’t have that.
He has a blue badge for parking.
Yes to free prescriptions.
I don’t think he’s paid tax previously, which is why he’s mad. I’ll add up how much he gets a month from the two pensions, then ring the tax office. He seems happier if I speak to someone, rather than ask a computer.

If he earns over 12570 on total of both his pensions then he'll pay tax on the amount over this.

IIRC this year a lot of previously non tax paying retirees will fall into having to pay tax for the first time. Personal Allowance rates were frozen a while back, but as state pension rate increases every year, those with even small private pensions are going to breach the tax threshold.

I know.

Does he have any share dividend income? Or savings not in ISAs?
There is a tax free allowance for both, but above that this income is also taxable.

What do you mean by 'temporarily'? Are you saying that his code for next year is different to the code for this year, or has his code for the current year changed?

He had a letter saying that he owes a small amount, so they’ve given him a temporary code while they take the money owed, then it will be reviewed in April.
According to him he’s not paid tax since he retired, that he can remember.

Yes he has some savings in a bank account

Helpline staff at HMRC are striking on various days for the next month so you will probably be on hold for a very long time OP
If his two pensions have increased so that his income is above the £12570 personal allowance phoning HMRC is probably pointless.

Has he got any savings? That’s the other thing that can lower tax codes. Or has he been paying too little in the past?

Yes he has savings, I didn’t realise that lowered your tax code.
Is there anything that the government doesn’t know about you!

It is the income from the savings you pay tax on, not the savings in themselves.

Total up your dad's 23-24 income from both pensions then check the amount of his allowance on savings income from this link HMRC guidance you'll also need to know how much interest he received in the tax year. You'll need these figures anyway if you still want to phone HMRC on his behalf.

You pay tax on the interest on savings if it's above a certain amount. When interest rates were really low someone would have to have a LOT in savings to be receiving that level of interest. But interest rates are higher now.

www.moneysavingexpert.com/savings/personal-savings-allowance/

He's allowed £1000 interest per year from savings accounts. If he has more interest than that, it's taxable. I don't think it changes your tax cade - it's added to your income. But if you owe tax from last year (because savings rates went up for example), they reduce your tax code so the tax gets paid back.

(Originally, your savings interest was paid after tax, but when the put the £1000 allowance in place, this would have got complicated, so now interest is paid gross, ie without the tax taken off.)

And I presume you're taking account of the fact that the tax code is the allowance divided by 10, so a tax code of 400 means an allowance of 4000

Finally, up to now they haven't taken the tax from the state pension - for simplicity they've taken it all from the private pension. So a state pension of £8500, for example, would eat up £8500 of the allowance, leaving him with £4000 allowance to set against his private pension, so his code would be 400.
(whereas he might expect a tax code of 1257 to reflect his personal allowance)

I say "up to now", because for the first time the state pension can be more than the taxable allowance, so for people who have only the state pension, they're having to grab the tax from that.

He had a letter from his private pension company saying that they had been advised of the tax code, and they were taking money from there, so I rang the tax office and they answered surprisingly quick. He’s having the money from both the letters taken from his private pension. I told him to look at it as if his pension had dropped, rather than he’s being taxed, it sits easier with him!
And he’s vowed to claim the bus pass that he doesn’t need, just to try and claim some of his money back!