Tax query re pension help?

[Seymourscat]

I am working part time and am in 20% tax bracket with a normal personal allowance. I’m due an old pension from a previous job. Once that kicks in am I taxed at 20% on that also? (Obviously without the tax allowance.)

combined, still doesn’t push me into higher tax bracket so 20% is my rate. I think.

Thanks.

You are taxed on pension income in the same way as other income.
so you currently

• pay no tax on the first £12,570
• pay 20% tax on everything above £12,570 and below £50,270.

so as long as your total earnings (salary plus pension plus any interest income or other income) are less than £50,270 you’ll pay 20% tax on the pension.

Note that a lot of pensions have the option to take some tax free cash as well - either upfront if it is a defined benefit pension, and either upfront or gradually if it is a defined contribution pension

Yes, you'll pay 20% income tax on total income less personal allowance as long as total is under £50,270.

However, HMRC can sometimes do is apply your personal allowance to the pension first, and then tax the wages at the full 20%. Makes no difference overall as the tax is the same. You have the right to tell HMRC how you want your personal allowance to be applied, so if they do change it to the pension, you can just tell them to change it back to your wage. (Or if one source is under the PA threshold, HMRC may well split it between both sources - again you have the right to tell them how you want it split or applied).

You have the right to tell HMRC how you want your personal allowance to be applied

😯did not know this - thanks @taxguru!

To make a rough calculation of take home pay shall I just add both figures together, remove tax allowance then work out net from there?

I can use salary calculator I think. Obviously NI will only apply to salary?

You also have the right to allocate personal allowance, basic rate tax bands, etc., in any order that benefits you. Usually, the "official" order is best for most average people, but there are unusual cases where someone may want the standard order changed to produce a lower tax bill, which is entirely their right and permitted by tax laws.

(Though you may have to be assertive with HMRC as far too many of their customer service advisors don't know you have the right and don't know how to do it at their end!!).

Won't make a difference to the OP with a wage and pension, but sometimes makes a big difference to people with foreign income upon which foreign tax has been paid, or a particular mix of different kinds of unearned income, such as dividends, or "top slicing relief" (again very specific and uncommon).

I've just done one with someone who had a mix of wages, dividends, foreign rental income and foreign tax paid on the foreign rental income - took me over a year to get HMRC to accept my claim to re-arrange the order of income, allowances and bandings, but I got there in the end - a few thousand tax repayment for the client, plus a few hundred compensation for the HMRC mistakes/delays in dealing with a perfectly legal request to change the order!

Just making the point on here for other people who may be reading this post with more complicated affairs.

Yup, that's it for the income tax side of things and would be good to use to check your payslips when you start getting a payslip from each "employer"

Watch for HMRC cocking up by wrongly giving two personal allowances, i.e. one on each, or splitting the personal allowance wrongly, or not giving your full allowance over both. They are particularly bad at first, especially in the first year, and prone to mistakes. So you're best to keep an eye on it, compare the tax deducted on payslips to what tax should have been deducted under your own calculations and get onto them if it looks wrong.