MIL been sent a letter from HMRC saying she owes tax on her pension?

[nipersvest]

Bit odd, she's 86, never had one of these letters before but out the blue she's had one today saying she owes tax. She gets a number of different pensions, state, two private pensions which pay a tiny amount and another very small one inherited from her husband. Letter looks genuine but confusing as to why she's suddenly getting a tax bill for 23/24, anyone any ideas as to why?

How much are they in total?

Are her private pensions taxed at source?

From the government website: www.gov.uk/tax-on-pension

You pay tax if your total annual income adds up to more than your Personal Allowance. Find out about your Personal Allowance and Income Tax rates.

Has her amount increased at all?

My father has several pensions and pays tax because they add up to a decent amount and are well over his personal allowance.

The state pension is taxable income, but doesn’t have any tax deducted from it. Sounds like she’s gone over her personal tax allowance and they haven’t been able to deduct enough tax from her private pensions so she owes extra.

My dad has to pay tax on his private pension too it's pathetic really because he gets about seventy something pounds private pension his income is so low he is entitled to pension credit but they tax him on the private pension makes zero sense to me

She’s now over the personal allowance threshold so she’ll be taxed now.

And the reason she has suddenly got a letter now is because her pensions will have been going up each year but the personal allowance has been frozen for several years, so each year more people find that their income exceeds the allowance.

If all her pension income adds up to more than £12,570pa then yes she owes tax. If each individual pot provides less than that they are probably all not deducting tax so she needs to do an annual self assessment.

Well if she’s over tax free allowance, tax is due on that amount.

I have a tiny work related pension. As soon as I got my state pension tax was immediately deducted from my work pension at source. No discussion with me at all. I would have declared it but it happened automatically.
They seem to know everything.
Unless you are very rich and keep your money offshore. In which case that is fine.

Did you expect to be consulted about the amount PAYE took from your salary when you worked?

Exactly that. My Mum has to do a tax return (because of a small overseas pension) and usually receives a small rebate as a result. The amount of the rebate is decreasing year on year whiler her (non-state) pensions increase so, I suspect, that rebate may have disappeared altogether at next year's tax return.

I believe the tax is normally deducted from the pension before it is paid to her.

Exactly this. Same happened to my relative for first time ever.

I’ve got one, for interest I received, , on my savings account.. They are sending them out at the moment. 🙄

I get taxed at source from my pensions, but this is extra.

Anything over the £12,000 odd allowance is taxed, so pensions over this amount and interest on savings over £1,000 will be taxed. DH and I are taxed this way, one of my private pensions is less due to this, she shouldn’t be actually asked to pay tax, it should be collected through pension payments.

Happens automatically HMRC will be notified that you are getting a state pension. My husband had 2 small private pensions then within 3 days of his state pension hitting his bank account HMRC s not him a new tax code to deduct more tax from his private pension so that he doesn't owe any tax when he does his tax return in April. I'm one of those rich people you talk of with a gold plated defined benefit pension. I pay plenty of tax. Maybe I'm not wealthy enough to keep it off shore 🤣.

Thanks everyone, she's checked paperwork and seems it is correct. Just odd to get this for 23/24 given her income hasn't changed and she's not had any dealings with HMRC for years, the why now is the odd part.

Should she have been paying it previously, but didn't realise?

There's a drive currently to make sure people pay the tax they owe - and don't claim benefits they aren't entitled to - because state finances are so tight, and a lot of money which is needed to run the country is lost from both those things.

My parents pensions are taxed, they were kicking off about it earlier this year. Did Labour make a change to thresholds maybe.

This may be the first year that her income has exceeded the personal tax allowance.
Tax will never be actually deducted from state pension, but it is a taxable benefit. So your state pension takes up a big chunk of your personal allowance. When you add your other income onto that, whatever is over the allowance is taxed.
My sister has this situation, she receives SP, two occupational pensions and a third of her late husband's pension. She had to contact HMRC and tell them from which pension they should deduct the income tax.

No. No they didn’t. They’ve only been in power for a few months anyway, and governments don’t change tax thresholds for previous tax years.

😆😆😆

Well the state pension went up rhis year as every year soneven if the private pensions are unchanged, the state one has risen ?

As stated above the tax threshold is frozen. Each year your Mum has got a rise in state pension so now in the 23-24 tax year she's gone over the limit. She'll get one each year if she doesn't do the self assessment so they can tax from her private pension at source.