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over 80 income tax...

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didds
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over 80 income tax...

#199522

Postby didds » February 7th, 2019, 10:48 am

Mrs X is newly widowed, aged 89.

Before Mr X passed away (in 2018/19 paye year) she had two pensions - state of £185/week and post employment of £445/month.

She will now receive from Mr X's pension £286/month). Mr and Mrs X married in circa 1962, both born circa 1924-26,

She has no other income (some savings in ISAs apparently which are examplt of course).

Mrs X maintains that until now she hasn't paid any income tax - ie no deducations from her previous scenario. She believes she will now be liable with the additional pension income post bereavement. She doesn;t know her tax code as she has "not paid income tax thus far".

so my questions are...

1) Presumably her tax code is 1185L same as any other single person ? Her age etc doesn;t alter that?
2) I cant see that she won;t have paid any tax before - her income is already over the threshold?
3) she should be paying paye as far as I can see ?
4) she will not be paying NIC?
5) who should be extracting PAYE at source? state pension? employment pension? husbads pension?


cheers

didds

pochisoldi
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Re: over 80 income tax...

#199545

Postby pochisoldi » February 7th, 2019, 11:42 am

Leaving the other 3 questions for others to answer

didds wrote:4) she will not be paying NIC?
5) who should be extracting PAYE at source? state pension? employment pension? husbads pension?


NI is not payable once you reach state pension age, and in any case pension payments are not liable to NI.

Re PAYE:
The state pension is paid gross, and a pensioner's tax code is amended to deduct the gross pension from the tax free amount.

When there is just one other pension in payment (not the case here), PAYE is deducted by that provider using the tax code which has been reduced by the state pension.

Where there is two or more pensions in payment and where the remaining tax free allowance permits, each pension provider will be issued a tax code by HMRC. This will invariably be wrong and will probably result in extra tax being paid. In this scenario it is best for the tax payer to work out the best way to distribute the tax free amount, and then contact HMRC to get the tax codes changed.

For example:
Doris has state pension of £8700pa, and the standard tax free amount of £11850, and two small private pensions.

The state pension consumes some of that allowance, leaving £3150 to be applied to her other PAYE income.

One private pension pays £1800 pa, is fixed and will never go up, A second private pension pays £2400pa, and is index linked.
HMRC decide that for Doris, they will allocate all the tax free amount to the highest pension.
So Pension #2 gets a tax code of 315L, and Pension #1 gets a code of 0T (no allowance due).

This means that some of Doris' allowance is left unused, and her first pension gets taxed at 20% on the lot.
Doris then has to claim back the extra tax paid.

Doris decides to do something about this, and asks HMRC to allocate her tax code as follows:

£8700 to state pension (this can't be changed)
£1800 to pension #1 (code 180L), and she also asks HMRC to make sure this doesn't change from year to year.
She asks the the balance to be assigned to pension #2: (3150-1800=£1350)
£1350 to pension #2 (code 135L).

For an encore, Doris then decides to take on a part time job.
When she starts, she ticks the box on the employer's new starter form which says that she already has another job.
When her employer cranks the handle on their payroll and updates their HMRC Real Time Reporting, she gets assigned a BR tax code for this job, so everything gets taxed at 20% (because her allowances are assumed to have been fully used up elsewhere).
Although her weekly wages are sometimes high enough for a 60yo youngster to pay employee's NI, she doesn't because she's reached state retirement age.

PochiSoldi

didds
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Re: over 80 income tax...

#199549

Postby didds » February 7th, 2019, 11:47 am

thanks PS. what a mess.

Mrs X won't be able to handle/sort that level of HMRC sums. eff eff ess.

deep joy.

didds

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Re: over 80 income tax...

#199553

Postby didds » February 7th, 2019, 12:04 pm

why does tax have to be so taxing?

pochisoldi
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Re: over 80 income tax...

#199554

Postby pochisoldi » February 7th, 2019, 12:05 pm

didds wrote:thanks PS. what a mess.

Mrs X won't be able to handle/sort that level of HMRC sums. eff eff ess.

deep joy.

didds


One of the smaller reasons why my Mum loves me...

didds
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Re: over 80 income tax...

#199564

Postby didds » February 7th, 2019, 12:31 pm

OK - so ...

Mrs X has £11,850 allowance to split between incomes of

state: 9620
own: 5340
husband: 3432
total 18392

both her and husbands pension are not fixed, both index linked.

so after her state pension she has £2230 left of her allowance. So she can ask for that to be applied to her own pension, and 0T to husband's ?

that may not be quite so difficult - aside from her talking to HMRC somehow (she doesn't do online. That just won't happen.)

And yes I can do it for her - not sure how we get round the Didds-dealing-with-HMRC-on-MrsX-behalf (though as it turns out Didds does have LPA for finance for Mrs X but she is fully compis mentis etc)

does that sound right?

didds

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Re: over 80 income tax...

#199633

Postby PinkDalek » February 7th, 2019, 4:15 pm

didds wrote:And yes I can do it for her - not sure how we get round the Didds-dealing-with-HMRC-on-MrsX-behalf (though as it turns out Didds does have LPA for finance for Mrs X but she is fully compis mentis etc)


Have you tried one of these?

Tax agents and advisers: authorising your agent (64-8)

Use form 64-8 to authorise HM Revenue and Customs (HMRC) to communicate with an accountant, tax agent or adviser acting on your behalf.

https://www.gov.uk/government/publicati ... agent-64-8

See also https://www.gov.uk/guidance/applying-fo ... aper-forms which leads to the link above.

didds
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Re: over 80 income tax...

#199647

Postby didds » February 7th, 2019, 4:54 pm

cheers PD - I suppose a possible issue (?) is I would be none of "accountant, tax agent or adviser acting on your behalf."

I'd certainly not be advising her (merely asking questions of HMRC on her behalf based on suggestions Ive gleaned from elsewhere) and I've no qualifications to act as an accountant or tax agent. If I was I wouldn't have to be asking for help from you knowledgeable types :-)

that's not to shoot the messenger though - thankyou PD

didds

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Re: over 80 income tax...

#199654

Postby PinkDalek » February 7th, 2019, 5:27 pm

That 64-8 is merely to register you as her tax agent, thus enabling you to speak direct once you’ve passed security. There’s even an agent helpline where the phone queues are shorter. You don’t have to be a professional or similar. There was some talk of tightening up on the whole procedure, I think, but I’ve no idea how that progressed.

Merely as an example, I was an “agent” for my mother and a nephew and am currently one for my sister. It also assists with receiving (some) copy post, especially if the recipient is not speedy in passing such letters across. Unfortunately, HMRC do not copy agents in with hard copy Notices of Coding.

Oh and btw, anyone can call themselves an accountant (not suggesting you need to nor should) as it is not a protected term in law (as against saying one is a solicitor). Bear that in mind when one reads of accountants on TLF, especially when their qualifications are not mentioned.

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Re: over 80 income tax...

#199665

Postby robbelg » February 7th, 2019, 6:19 pm

I would recommend a policy of strategic ignorance & inaction.

Do nothing,say nothing until and unless you (she) is contacted by HMRC.

Rob

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Re: over 80 income tax...

#199668

Postby tjh290633 » February 7th, 2019, 6:28 pm

didds wrote:OK - so ...

Mrs X has £11,850 allowance to split between incomes of

state: 9620
own: 5340
husband: 3432
total 18392

both her and husbands pension are not fixed, both index linked.

so after her state pension she has £2230 left of her allowance. So she can ask for that to be applied to her own pension, and 0T to husband's ?

that may not be quite so difficult - aside from her talking to HMRC somehow (she doesn't do online. That just won't happen.)

And yes I can do it for her - not sure how we get round the Didds-dealing-with-HMRC-on-MrsX-behalf (though as it turns out Didds does have LPA for finance for Mrs X but she is fully compis mentis etc)

does that sound right?

didds

She will have a tax code for her own pension which will be 962 less than the full personal allowance, to allow for the untaxed state pension. The other pensions will have tax codes of "BR", which means everything will be charged at the basic rate.

TJH

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Re: over 80 income tax...

#199683

Postby JonE » February 7th, 2019, 7:09 pm

PinkDalek wrote:Oh and btw, anyone can call themselves an accountant (not suggesting you need to nor should) as it is not a protected term in law (as against saying one is a solicitor). Bear that in mind when one reads of accountants on TLF, especially when their qualifications are not mentioned.

Perhaps it's the case nowadays that increasing awareness among the general public of the activities of the Big Four have brought the accountancy profession into such disrepute that admitting to being an accountant is like admitting to being a banker. That may explain why my bookie for so very many decades no longer calls himself a Turf Accountant. ;)

Cheers!

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Re: over 80 income tax...

#199685

Postby pochisoldi » February 7th, 2019, 7:13 pm

didds wrote:OK - so ...

Mrs X has £11,850 allowance to split between incomes of

state: 9620
own: 5340
husband: 3432
total 18392

both her and husbands pension are not fixed, both index linked.

so after her state pension she has £2230 left of her allowance. So she can ask for that to be applied to her own pension, and 0T to husband's ?

that may not be quite so difficult - aside from her talking to HMRC somehow (she doesn't do online. That just won't happen.)

And yes I can do it for her - not sure how we get round the Didds-dealing-with-HMRC-on-MrsX-behalf (though as it turns out Didds does have LPA for finance for Mrs X but she is fully compis mentis etc)

does that sound right?

didds


Sounds right to me - though it could just as be a "BR" code applied to the third pension rather than "0T".

If the all remaining allowance is assigned to the smaller husband's pension, it wouldn't be an issue as long as that pension uses all of the remaining allowance in future years.

As far as the "helping someone deal with their tax" is concerned, for a one off over the phone I would suggest collecting together all the relevant information: NI number, PAYE references for each pension (where available), and then make the call yourself with Mrs X by your side, who can then verify her details and that she is happy for you to deal with the matter.

For this specific task, I think HMRC have a "request a change to your tax code" online form, but that that sounds like a no-no here.

The final option, (which would be better use of stamp compared to posting off a 46-8 agent form) is to write a letter, as short and sweet as possible specifying her NI number and asking for the remainder of her personal tax allowance to be assigned to "<insert name of pension fund>" quoting any PAYE reference and also any "pensioner"/"payroll" reference number. Mrs X can then sign it herself, and if anything comes back she can let you have a look at it.

PochiSoldi

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Re: over 80 income tax...

#199704

Postby PinkDalek » February 7th, 2019, 8:19 pm

pochisoldi wrote:The final option, (which would be better use of stamp compared to posting off a 46-8 agent form) is to write a letter, ...



The reason I'm suggesting putting a 64-8 in force now is due to Mrs X's age. Wishing her all the best in the world but, as well as being recently widowed, she is not exactly a youngster and having didds or someone close to her that she can trust copied in on correspondence and being able to contact HMRC without bothering her unduly, must be sensible for the future, if not now.

No?

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Re: over 80 income tax...

#200063

Postby Bouleversee » February 8th, 2019, 11:10 pm

Has she been notified how much state pension she will get? I ask because although I inherited my husband's state pension, I lost my own which was almost a full state pension for someone of my age (less than people now get on retirement) as I had paid a large sum in voluntary contributions many years previously. I never quite understood why I lost it and wonder whether that is an unwelcome surprise awaiting her. On the other hand, it could be that one retains whichever is the largest state pension and in this case hers is larger than his.

Do you live too far away to fill in a paper return together for her to sign?

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Re: over 80 income tax...

#200066

Postby tjh290633 » February 8th, 2019, 11:23 pm

When your other half dies, you keep your pension earned in your own right, but, if the basic pension you get is less than your other half did, you get that amount. I believe that SERP/S2P can also be passed on, within limits. I did once work how how it was done, but I've forgotten about it until now. Best to see what the gov.uk website has to say on the subject.

TJH

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Re: over 80 income tax...

#200445

Postby didds » February 11th, 2019, 6:48 am

Bouleversee wrote:
Do you live too far away to fill in a paper return together for her to sign?

140 miles away, requiting circumnavigation of Birmingham either by M42 (east side) or through Walsall.

didds


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