Pension advice

[Scrabsqueak]

My MIL gets a work pension from her husband and state pension. She has just had a letter from HMRC saying she owes them tax on amounts which are higher than she receives. I will see her next month but in the meantime wondered if there was any way I can check details, as she is getting stressed. I live 400 miles away, so can’t get up more often, there is no one else. They seem to be taxing her on amounts she received a few years ago, but these amounts were reduced at least 2 years ago. The tax is for this year. Any one have any suggestions?

Sorry, should have mentioned she is 88, and never had to look after own finances. I have POA, although at the moment she is still very capable, just not used to doing it.

Contact HMRC. You might need her present for this. Tax isn’t payable yet is it? Get power of attorney.

She could appoint an accountant. Has she not filled in self assessment? Who told HMRC what her income was? Does she not have a contact no on the tax form? If she cannot do the phone call, she needs external help.

She has no income other than pension and has never had to fill in a self assessment. They know her income as it’s pension I assume. She could contact HMRC, but I doubt if she is really clear what to ask. I can not do anything till I visit as have no way of having sight of the letter.

And you're correct, it’s not due till next April, and they will take it from her pension, so it’s not the end of the world, but it’s scaring her.

She doesn’t need an accountant or to get involved with self assessment, all of that would be a complete waste of money. Calling HMRC could take hours with no guarantee of any useful help from them.

I’ve spent 40 years in the private sector challenging PAYE tax calculations at all levels and believe me I’ve seen it all.

Most importantly, tell her not to worry. No one is ever going to come knocking on her door.

So, is the correspondence an actual common or garden tax calculation or a simple assessment? Both look the same but the wording on the correspondence will be one or the other.

Loads of pensioners are being frightened with these calculations now. It’s due to fiscal drag - tax free allowances have been frozen for years and incomes are starting to exceed the thresholds.

If she can get someone to photograph the letter and send it to you, and you can remove identifying information and post it here then I can talk you through it.

You could sign her up to the Government Gateway (it may be called something else now). You can the look at all the tax years and see how tax has been calculated. Although pensions don't usually go down so I'm not sure why she is receiving less than a few years ago.

https://www.gov.uk/log-in-register-hmrc-online-services

@QueenieBaxtersrougepot Obviously not if it’s just the state pension. I was assuming more money was involved.

Well I haven’t assumed anything. OP says state pension and works pension.

As you have power of attorney, you can register that with HMRC and talk to them yourself. Probably easier to start with getting her online tax account set up though, through Government Gateway. You'll need a few details from her tax letter, then they'll send her a code to verify, but she can give you all that info over the phone.

Also get her to read you the full letter, slowly so you can copy it down. Then you'll know what the actual problem is.

pensions don't usually go down so I'm not sure why she is receiving less than a few years ago.

Some spousal pensions pay a higher amount for the first year or two after the original holder's death.

Don't HMRC work a year in arrears?
So they've only just got around to looking at the final numbers for 24/25. Is this what's confusing her?

Fiscal drag means that almost anyone who has a state pension plus a little bit of private pension now has to pay tax.

@MittensTheKittens is correct. There is no mechanism for collecting tax from a state pension, so if the total of state pension + occupational pension + interest on any savings accounts is greater than the tax threshold, she will owe some tax. This should be adjusted in the following tax year to be taken from the occupational pension.

what you can do:
get her to find someone who can take a photo of the letters to send you
i think she can nominate you to deal with her tax affairs without having to go through the whole POA thing (I’m not 100% sure on this but seem to remember there is a space on the tax form for this)
I also think Citizens Advice or Help the Aged can help check things through
check her bank accounts for the amounts received. Don’t forget state pension is 4-weekly so x 13 when calculating annual amounts
check any savings - maybe worth switching them to an easy access cash isa if the interest comes above the taxable threshold
she should get a payslip/p60 from the occupational pension so she can send you that
when you can see the tax calculation, check that there are no other unexplained deductions from the standard allowance or other additions to the income

good luck

@MittensTheKittens

It could be a revised code for current year due to new info received, probably re state pension. That revised code creates a potential underpayment in current year.

The bottom line is, that at this point it could be any number of things, as nobody has seen the letter except the poor lady who is worried sick about it. I do hope OP is able to reassure her.

@Defiantly41

Have you heard of K codes?

Thank you all so much for your helpful suggestions. Unfortunately, there is no one else who could send me a photo of the letter, so I think it will have to wait till I get there. I think that makes sense that her DHs pension was a certain rate then reduced as it is 4 years (today😢) since he died and she said it reduced a couple of years ago.
it doesn’t seem as though it is too urgent though, so 3 more weeks won’t make much difference I hope.
I wish Govt departments still did home visits to elderly people.

Couod it be a scam? Ask her what the contact details are, then you google them and see if they are legit.

Nothing will be done till I go there, so even if it is a scam, they won’t get anything out of her as she will wait for me.