Paying tax on your pension

Your monthly pension is a taxable income depending on your total income and personal tax allowances. HM Revenue and Customs (HMRC) determine your tax allowances and supply us with a tax code which we must operate. Once we receive official notification from HMRC we will apply the correct code. Only HMRC can instruct us which tax code to apply to your payments.

If you are a new pensioner we may have to apply a temporary tax code to your pension until we have been notified by His Majesty's Revenue and Customs (HMRC) of your correct code as we do not know the income level you may have from other sources. This avoids the likelihood of a large tax bill being issued at the end of the financial year.

If the temporary tax code results in an overpayment of tax we will refund you when we apply the correct code.

The Pension Fund can only refund overpaid tax within the same tax year. Overpayments relating to previous tax years will come from HMRC.

Only HMRC can instruct us which tax code to apply to your payments.

The tax you are eligible to pay is dependant upon your total income and personal tax allowances. If you are now paying tax it is likely your tax code has changed or your income is over your stated allowance.

Please see GOV.UK: Tax codes - What your tax code means for an explanation of your tax code.

Your tax code will change if you begin to receive a second income such as:

• a salary from a new job
• another pension coming into payment
• your State Pension coming into payment

Should you have a second income your tax code may change if HMRC split your tax allowance between your incomes so you pay a smaller amount of tax across both. If your tax code does not change your allowance may be fully applied to your pension income and you will receive no allowance on your other income.

When your State Pension comes into payment your tax code will reduce. The State Pension cannot be taxed at source so the amount of State Pension you receive will reduce your taxable allowance by that amount. Your remaining taxable allowance will be applied to your other incomes.

If you feel you are paying an incorrect amount of tax please contact HMRC directly.

HM Revenue and Customs (HMRC) set your tax code which includes your tax free allowance.

We are, therefore, unable to provide information on how the coding was decided or why it might have changed. If your query relates to this please contact the tax office direct. The Northumbria Area office deals with our pensioners. The contact details are shown below:

HMRC
PO Box 4000
Cardiff
CF14 8HR
Tel: 0300 200 3300
web site: HM Revenue and Customs

Please quote the tax reference 504/15018 and your National Insurance number.

If you have any general queries with regards to the deduction of tax such as when a new code will be operated from or if we have received an amended coding please contact us. Please note we may need to direct you back to the tax office depending on your query.

Living overseas

If you live overseas and are concerned about tax please visit HMRC's Overseas Tax Information.