State Pension - Tax Return

[firefly]

I started to draw my state pension in the 2021/2022 tax year.

When trying to complete my tax return online a figure is given to me as follows:-

State Pension (the amount due for the year): £ 6,244.00

However I have received £5,505.78 in the tax year.

There is a space to alter the figure of £6,244.00 - but why is there a difference in the first place?

Or do you think I am missing something?

Kind Regards,

[bluedonkey]

The correct figure is what you were entitled to during the year, not what you actually received in your bank a/c. Calculate the amount based on the number of weeks from the date of your entitlement and see if this tallies.

[mc2fool]

Because HMRC goes by the entitlement of state pension you "earned" during the year, not the amount you were paid, which is, of course, in arrears.

[Arborbridge]

Because HMRC goes by the entitlement of state pension you "earned" during the year, not the amount you were paid, which is, of course, in arrears.

That wording the HMRC uses has always been confusing to me. Why not just add up all 13 payments made, and that's it? Simple: how could it be wrong? It's what happens with building society interest or anything else. Just add it up and that is what one is taxed on, not some theoretical figure you haven't received.

Arb.

[XFool]

I started to draw my state pension in the 2021/2022 tax year.

When trying to complete my tax return online a figure is given to me as follows:-

State Pension (the amount due for the year): £ 6,244.00

However I have received £5,505.78 in the tax year.

There is a space to alter the figure of £6,244.00 - but why is there a difference in the first place?

Or do you think I am missing something?

Ah........ You may well ask! This matter has plagued me for years - as I am by nature pedantic.

It's the calendar.

The DWP sends you a statement before the start of the new tax year, saying how much state pension you will receive, starting in the new tax year (i.e. from 6th April). Unfortunately... the DWP figure is the amount you are destined to receive weekly - most weeks in the year. You may opt to receive your SP monthly, in which case, during the tax tear you will, typically, receive 13 monthly payments (which will not usually all be equal). Unless you receive 12 (non equal) payments, or possibly 14 (non equal) payments. Got it?

HMRC expects you to enter figures for the last tax year. Supposedly the amount of SP due to you in the tax year. It also posts a figure in the online SA for the SP you received in the year. Is this correct?

1. It can be the same or different to the HMRC figure given in your HMRC Tax Coding statement

2. It can be the same or different (I think) to the 13 times the normal monthly SP payment in the year - usually the advised figure from paper SA Notes

3. You could just use the total received in the tax year, regardless of when it falls "due". I do! Usually this aligns very accurately with the HMRC SA pre-entry figure. Not last year, as I only received 12 SP payments in the tax year - it's the calendar - so my figure will be well short of the HMRC pre-loaded figure.

My thinking is... as my figure, on a year by year basis, is the total amount I actually receive, in the long run it must be correct. Other figures are available.

[XFool]

Because HMRC goes by the entitlement of state pension you "earned" during the year, not the amount you were paid, which is, of course, in arrears.

That wording the HMRC uses has always been confusing to me. Why not just add up all 13 payments made, and that's it?

Indeed!

Except when it's 12 payments made, or 14 payments made?

I am actually running a spreadsheet on this...

[Arborbridge]

Because HMRC goes by the entitlement of state pension you "earned" during the year, not the amount you were paid, which is, of course, in arrears.

That wording the HMRC uses has always been confusing to me. Why not just add up all 13 payments made, and that's it?

Indeed!

Except when it's 12 payments made, or 14 payments made?

I am actually running a spreadsheet on this...

Really? I only ever have 13. Note they are a mixture of the last year's rate, plus this year's rate.

[Lootman]

Because HMRC goes by the entitlement of state pension you "earned" during the year, not the amount you were paid, which is, of course, in arrears.

That wording the HMRC uses has always been confusing to me. Why not just add up all 13 payments made, and that's it? Simple: how could it be wrong? It's what happens with building society interest or anything else. Just add it up and that is what one is taxed on, not some theoretical figure you haven't received.

Not anything else. Rent is supposed to also be reported on an accrual basis rather than on an actual basis. But most landlords don't bother and it doesn't seem to be a big issue for the taxman as it evens out over time.

I have an accountant do my taxes and in regards to the state pension he asks me just one question: What was the DWP statement of the weekly amount you receive for that tax year?

He takes that number and multiplies it by 52. Couldn't really be easier and certainly easier than looking up the dates and amounts of 13 payments!

[XFool]

Except when it's 12 payments made, or 14 payments made?

Really? I only ever have 13.

Then you must be on another planet to me.
(Or have been in receipt of the SP for a relatively few years)

Note they are a mixture of the last year's rate, plus this year's rate.

Sure. At least they are near the end/start of the tax year.

[XFool]

I have an accountant do my taxes and in regards to the state pension he asks me just one question: What was the DWP statement of the weekly amount you receive for that tax year?

He takes that number and multiplies it by 52. Couldn't really be easier and certainly easier than looking up the dates and amounts of 13 payments!

Effectively this is the 13 times usual monthly amount approach.

This seems to sometimes come out a little higher than the HMRC Tax Code figure. I don't know how it compares to the HMRC SA pre-entry figure, as I don't keep records for that.

[Lootman]

I have an accountant do my taxes and in regards to the state pension he asks me just one question: What was the DWP statement of the weekly amount you receive for that tax year?

He takes that number and multiplies it by 52. Couldn't really be easier and certainly easier than looking up the dates and amounts of 13 payments!

Effectively this is the 13 times usual monthly amount approach.

This seems to sometimes come out a little higher than the HMRC Tax Code figure. I don't know how it compares to the HMRC SA pre-entry figure, as I don't keep records for that.

OK, since I don't have a tax code and I don't use their online SA system, I wouldn't know. But yes, 13 times the 4-weekly amount should certainly be equal to 52 times the weekly amount!

[bluedonkey]

Because HMRC goes by the entitlement of state pension you "earned" during the year, not the amount you were paid, which is, of course, in arrears.

That wording the HMRC uses has always been confusing to me. Why not just add up all 13 payments made, and that's it? Simple: how could it be wrong? It's what happens with building society interest or anything else. Just add it up and that is what one is taxed on, not some theoretical figure you haven't received.

Not anything else. Rent is supposed to also be reported on an accrual basis rather than on an actual basis. But most landlords don't bother and it doesn't seem to be a big issue for the taxman as it evens out over time.

I have an accountant do my taxes and in regards to the state pension he asks me just one question: What was the DWP statement of the weekly amount you receive for that tax year?

He takes that number and multiplies it by 52. Couldn't really be easier and certainly easier than looking up the dates and amounts of 13 payments!

The default for rental income is the cash basis unless the gross rents exceed a threshold.

[firefly]

Thank You.

I think I understand now - the only confusion I have is that I seem to be being paid £215.31 per week - not complaining - but this is more than the maximum pension?

[Dod101]

Anyway, what I do as far as the State Pension is concerned is use the HMRC figure and find that it evens out over the years. I gave up trying to’prove’ the amount one way or the other.

But as has been said, it seems that HMRC wants us to report the entitled amount per week not the actual amount received.

Dod

[mc2fool]

I think I understand now - the only confusion I have is that I seem to be being paid £215.31 per week - not complaining - but this is more than the maximum pension?

Yeah, you probably also believe that you need 35 years of contributions to get the "full" state pension too, right?

All that sort of stuff you've heard about the new state pension only applies to anyone who retires totally under the new state pension system, i.e. people born in 1998 and later. For anyone that got any qualifying years prior to 2016 the situation is much more complicated. In your case you obviously spent some of your career not being contracted out, and so are benefiting from the old system additional state pension.

[Lootman]

the only confusion I have is that I seem to be being paid £215.31 per week - not complaining - but this is more than the maximum pension?

The theoretical maximum can be exceeded. Either because your SP is computed under the old rules and you have an earning-related component. Or because you deferred receiving your SP and get an additional amount for each year you did that. Or both.

There may be other factors that I don't know about. It does seem like everyone gets a different amount. The US state pension puts ours to shame though - the maximum you can get there is about £700 a week.

[tjh290633]

Except when it's 12 payments made, or 14 payments made?

Really? I only ever have 13.

Then you must be on another planet to me.
(Or have been in receipt of the SP for a relatively few years)

Note they are a mixture of the last year's rate, plus this year's rate.

Sure. At least they are near the end/start of the tax year.

I have been receiving the State Retirement Pension since 1998. There has only been one year in which I received 14 payments, which was 2003-4. Never has there been 12 payments.

TJH

[XFool]

2014-15: 14
2015-16: 13
2016-17: 13
2017-18: 13
2018-19: 13
2019-20: 13
2020-21: 12

[Arborbridge]

Because HMRC goes by the entitlement of state pension you "earned" during the year, not the amount you were paid, which is, of course, in arrears.

That wording the HMRC uses has always been confusing to me. Why not just add up all 13 payments made, and that's it? Simple: how could it be wrong? It's what happens with building society interest or anything else. Just add it up and that is what one is taxed on, not some theoretical figure you haven't received.

Not anything else. Rent is supposed to also be reported on an accrual basis rather than on an actual basis. But most landlords don't bother and it doesn't seem to be a big issue for the taxman as it evens out over time.

I have an accountant do my taxes and in regards to the state pension he asks me just one question: What was the DWP statement of the weekly amount you receive for that tax year?

He takes that number and multiplies it by 52. Couldn't really be easier and certainly easier than looking up the dates and amounts of 13 payments!

Except that it isn't what I was actually paid, is it. Why the HMRC want to tax me on this figure - which could be quite wide of the mark if for some obscure reason the DWP didn't pay correctly - rather than the amount I've actually received, I've no idea. Mind you, Statements from the HMRC never make much sense anyway and are written in a way I've never encountered from any other authority - I am always reminded of what Douglas Adams called "bistro maths".

Arb.

[Arborbridge]

2014-15: 14
2015-16: 13
2016-17: 13
2017-18: 13
2018-19: 13
2019-20: 13
2020-21: 12

Strange - I wonder why. It's never happened to me as far as I know, and I've been filling in pensions on SAs for 12 years.