Author Topic: Self Assessment And State Pension  (Read 1157 times)

StephenM123

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Self Assessment And State Pension
« on: Feb 14, 2018, 02:30:51 PM »

Three weeks ago I completed and submitted my self assessment. According to the calculation I had underpaid and so I paid this. Today I received a tax summary that said I still owed tax. Going through it all the discrepancy relates to my pension income. For my small (pre-84) company pension I had a P60 so there could be no chance of error. It therefore seems that the discrepancy is in my state pension. DWP did not send me a P60 so I went through all my bank statements: first with a calculator and then inputting everything into a spreadsheet and got the same answer. I have just been through it again and got the same answer!


Does anybody know where this discrepancy can come from? It seems odd to me that DWP pass the information onto HMRC and yet do not send it to the pensioner!

Phil

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Re: Self Assessment And State Pension
« Reply #1 on: Feb 14, 2018, 09:58:04 PM »
A P60 is only issued by a tax collecting entity & the DWP is not one so it doesn't issue a P60 as it has no mechanism for collecting income tax.

Any income tax owed by a pensioner has to be collected by the private pension provider or any other entity that pays the pensioner an income.

Your State Pension is added to your private income & it's up to your pension providers to pay the correct amount of tax based on what HMRC have told them so one or both haven't deducted the correct income tax.

Have you checked that HMRC have got your State Pension income correct for the tax year?





« Last Edit: Feb 14, 2018, 10:07:50 PM by Phil »
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minniemouse

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Re: Self Assessment And State Pension
« Reply #2 on: Feb 14, 2018, 10:14:45 PM »
Tax isn't deducted from savings anymore. You have to declare if you've had more than 1,000 interest in any one tax year because then it becomes taxable.  Is this where the discrepancy is? 
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Phil

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Re: Self Assessment And State Pension
« Reply #3 on: Feb 14, 2018, 10:20:02 PM »
Tax isn't deducted from savings anymore. You have to declare if you've had more than 1,000 interest in any one tax year because then it becomes taxable.  Is this where the discrepancy is?

Only if the total income is above 17,500 per year which will rule many pensioners out of a savings income tax liability.

https://www.gov.uk/government/publications/personal-savings-allowance-factsheet/personal-savings-allowance
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minniemouse

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Re: Self Assessment And State Pension
« Reply #4 on: Feb 14, 2018, 10:25:16 PM »
That's interesting Phil, I didn't know that. Not that it applies to me!
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Phil

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Re: Self Assessment And State Pension
« Reply #5 on: Feb 14, 2018, 10:27:38 PM »
That's interesting Phil, I didn't know that. Not that it applies to me!

Nor me.

It probably applies to the odd Brummie or two.

 :D
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StephenM123

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Re: Self Assessment And State Pension
« Reply #6 on: Feb 16, 2018, 09:29:34 PM »
Well it seems that HMRC assume all state pensions are paid weekly. In my case it is four weekly. As I was paid 17th March (in arrears) I am being taxed on money I had not received. However, I still cannot get the exact figure stated by HMRC even if I reduce it to a daily rate and work out the number of days I was paid in 2016/17 (I was only retired for two months). So it's another phone call or two next week.   :(   What a way to complicate things!

Phil

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Re: Self Assessment And State Pension
« Reply #7 on: Feb 16, 2018, 09:52:29 PM »
Well it seems that HMRC assume all state pensions are paid weekly. In my case it is four weekly. As I was paid 17th March (in arrears) I am being taxed on money I had not received. However, I still cannot get the exact figure stated by HMRC even if I reduce it to a daily rate and work out the number of days I was paid in 2016/17 (I was only retired for two months). So it's another phone call or two next week.   :(   What a way to complicate things!

HMRC are correct insomuch as the State Pension, as are all benefits, classed as weekly entitlements no matter whether they're paid weekly, fortnightly, monthly or quarterly.

Below is the official HMRC guide for recording the State Pension on the SA100 tax return form.

State pensions.

You are taxed on the 'full amount' of state pension you were entitled for the year to 5 April 2017, which is the total of your weekly entitlements. As a guide, to calculate the total of your weekly entitlements for a full year, if you were paid:
 
Weekly
Add up the 52 weekly amounts as shown on your bank statement or building society passbook (if you were paid by direct debit)
4-Weekly
Multiply your 4-weekly amount by 13
Quarterly
Multiply the quarterly amount by 4

HMRC collect income tax based on what a person was due to receive in a tax year whether or not they did receive the payment in that tax year.

Many small businesses fall foul of this rule by not declaring invoices issued where payment has not yet been made.

E.G. If your trading year ended on the 31st March 2017 & you issue an invoice for 1,000 on that date but didn't get paid until the 15th May 2017, that 1,000 & the tax due has to be included in the 2017 tax year, not the 2018 tax year.   
« Last Edit: Feb 16, 2018, 10:15:56 PM by Phil »
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StephenM123

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Re: Self Assessment And State Pension
« Reply #8 on: Feb 17, 2018, 08:43:19 AM »

HMRC are correct insomuch as the State Pension, as are all benefits, classed as weekly entitlements no matter whether they're paid weekly, fortnightly, monthly or quarterly.

Below is the official HMRC guide for recording the State Pension on the SA100 tax return form.

State pensions.

You are taxed on the 'full amount' of state pension you were entitled for the year to 5 April 2017, which is the total of your weekly entitlements. As a guide, to calculate the total of your weekly entitlements for a full year, if you were paid:
 
Weekly
Add up the 52 weekly amounts as shown on your bank statement or building society passbook (if you were paid by direct debit)
4-Weekly
Multiply your 4-weekly amount by 13
Quarterly
Multiply the quarterly amount by 4

HMRC collect income tax based on what a person was due to receive in a tax year whether or not they did receive the payment in that tax year.



What do they call a week? I am paid four weekly on a Wednesday - is it Thursday to Wednesday. However, I try and work it HMRC's figure comes out high. I did retire during the tax year.

StephenM123

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Re: Self Assessment And State Pension
« Reply #9 on: Feb 17, 2018, 09:04:22 AM »


HMRC collect income tax based on what a person was due to receive in a tax year whether or not they did receive the payment in that tax year.

Many small businesses fall foul of this rule by not declaring invoices issued where payment has not yet been made.

E.G. If your trading year ended on the 31st March 2017 & you issue an invoice for 1,000 on that date but didn't get paid until the 15th May 2017, that 1,000 & the tax due has to be included in the 2017 tax year, not the 2018 tax year.


Wonder if this was part of the reason I company I worked for reduced staff numbers by nearly 90% over a few years. They got anew financial director who cut costs to the bone - he removed the tropical fish from reception, cut hotel rates to the point where is was nearly impossible to find anywhere to stay, etc. (I was traveling a lot then), He also invoiced heavily, and early, to present good end of year figures (some of the invoiced work was not scheduled to start for months) to up his bonus! This caused a number of clients to cancel. So it sounds like he created a pig's breakfast!

Phil

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Re: Self Assessment And State Pension
« Reply #10 on: Feb 17, 2018, 10:48:22 AM »
I would imagine the week runs from when you qualified for your State Pension, my pension gets paid on a Monday.

At self assessment time I multiply my weekly pension amount, as shown on the Pension Service BR5899 letter, and check that it matches the amount on the HMRC P2 letter.
« Last Edit: Feb 17, 2018, 10:55:03 AM by Phil »
"I've stopped arguing with idiots. They will only bring me down to their level and beat me with experience.

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Phil

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Re: Self Assessment And State Pension
« Reply #11 on: Feb 17, 2018, 10:59:28 AM »
HMRC are correct insomuch as the State Pension, as are all benefits, classed as weekly entitlements no matter whether they're paid weekly, fortnightly, monthly or quarterly.

Below is the official HMRC guide for recording the State Pension on the SA100 tax return form.

State pensions.

You are taxed on the 'full amount' of state pension you were entitled for the year to 5 April 2017, which is the total of your weekly entitlements. As a guide, to calculate the total of your weekly entitlements for a full year, if you were paid:
 
Weekly
Add up the 52 weekly amounts as shown on your bank statement or building society passbook (if you were paid by direct debit)
4-Weekly
Multiply your 4-weekly amount by 13
Quarterly
Multiply the quarterly amount by 4

HMRC collect income tax based on what a person was due to receive in a tax year whether or not they did receive the payment in that tax year.

Many small businesses fall foul of this rule by not declaring invoices issued where payment has not yet been made.

E.G. If your trading year ended on the 31st March 2017 & you issue an invoice for 1,000 on that date but didn't get paid until the 15th May 2017, that 1,000 & the tax due has to be included in the 2017 tax year, not the 2018 tax year.


Small businesses can opt to use the 'cash based' system of accounting whereby they only account for money received when it's received but there are a lot of downsides & it can't be mixed & matched with the traditional tax accounting method & this is where many businesses fall foul of the rules.
"I've stopped arguing with idiots. They will only bring me down to their level and beat me with experience.

Paraphrased from George Carlin

Flopsy

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Re: Self Assessment And State Pension
« Reply #12 on: Feb 17, 2018, 08:25:45 PM »

Don't include your 10 Xmas bonus in your figure of state pension as this is not taxable.


In future you should get a letter each January telling you what your weekly rate of state pension will be from the coming 10 April. I usually multiply this figure by 52 (in a full year) to get the assessable amount.


Hope you have sorted it out with HMRC now.

Scrumpy

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Re: Self Assessment And State Pension
« Reply #13 on: Feb 19, 2018, 05:53:56 PM »
Hi Flopsy.. Good to see a new member .
Don't think of a caterpillar dying..Think of a butterfly living.


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