Non-motoring > Income tax on pensions while still working Legal Questions
Thread Author: martin aston Replies: 10
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New Wed 16 Feb 22 14:50 
 Income tax on pensions while still working - martin aston
Mrs Aston is approaching 60 and will shortly be drawing a couple of small pensions from previous employers. Meanwhile she will continue to work for her current employer. Her tax allowance is all used up on her job. The current employer has no connection with the previous ones.
I have spent a fruitless couple of hours online trying to work out the mechanics that will apply so that she pays the right tax. All the online advice I can find says the new pensions will be taxed ( which I knew already) but not how it works.
There must be millions of people in similar situations so maybe I am looking in the wrong place. Can anyone on here please explain the basic mechanics of who does what to ensure the pensions are taxed appropriately.
I know she could just ring the tax office but she leaves all this stuff to me and I’d like to know how it is supposed to work before I try to get her to contact anyone. She has zero interest in things financial. Anyone who has seen Blackadder teaching Baldric to count will know what I am up against.
Last edited by: martin aston on Wed 16 Feb 22 at 14:51
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New Wed 16 Feb 22 15:01 
 Income tax on pensions while still working - Fullchat
I have 2 Occupational pension. Same organisaion but different roles one of which as a civilian was TUPE'd across to another area and pension provider.
My main pension absorbs my tax allowance and the smaller second one is taxed at BR (Basic rate).
I'm about to draw my OAP and the tax will be deducted by my main pension provider by lowering the tax code.
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New Wed 16 Feb 22 15:09 
 Income tax on pensions while still working - Runfer D'Hills
She could just decide to submit her own tax return annually. It’s really easy (even Baldric could do it ) Just have to complete an online form once a year. Takes about 15 minutes.
It calculates any over or underpayment and you either pay up or get a refund.
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New Wed 16 Feb 22 15:10 
 Income tax on pensions while still working - Bromptonaut
I have an occupational pension from my 35 years as a Civil Servant. It uses up all my Personal Allowance and my tax code for employment at Citizens Advice is BR.

I was drawing the pension before starting employment. The pension provider either had my P45 automatically or I sent them a copy - cannot remember now.

I suspect if earnings through employment are sufficient to use the whole of a Personal Allowance the Pension will be taxed at BR.
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New Wed 16 Feb 22 15:24 
 Income tax on pensions while still working - tyrednemotional
....exactly this ↑ ....

Things get a bit more complicated if a single pension won't absorb the effects of the tax code, (and, I suspect, also if total earnings takes one into the higher tax bracket) but in the case set out, a tax code will be set against the larger pension (utilising all the allowance) and the remaining pension(s) will be taxed at base rate.

At state pension age, the original tax code is reduced (by deducting the annual amount of state pension from the then annual allowance) and the OAP is paid tax-free (offset by the effects of the reduced tax-code on the prime non-state pension.
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New Wed 16 Feb 22 15:10 
 Income tax on pensions while still working - Falkirk Bairn
Depending on the value of the Pensions

She is entitled to approx £12000 per year tax free assuming she is not on 6 figure income when it reduces to zero - depending on her income she will be taxed at 20%, 40% or higher.

The pension can be paid with Standard rate deducted.

If your wife pays Higher rate tax then there will be an adjustment to the £12000 tax free element to collect the extra 20/25%.

I am retired - I get 4 former employer pensions + State Pension

State Pension is taxable but paid gross.

My other Pensions are all taxed with the £12000 tax free element reduced by the £10K State Pension I receive.
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New Wed 16 Feb 22 15:28 
 Income tax on pensions while still working - martin aston
Thanks for advice to date, very quick gents.
To clarify she is a basic rate taxpayer and will never be a higher rate taxpayer. I already receive my one and only occupational pension and state pension so I am familiar with the way it affects my tax code. It happened pretty automatically, as I recall I just gave them the details of my occupational pension.
In her case it is less obvious (to me) as these are not the state pension and looking at her occupational paperwork they haven’t asked for her current employer details.
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New Wed 16 Feb 22 15:37 
 Income tax on pensions while still working - smokie
I think the advice above is good but I'd call the HMRC helpline for a definitive answer. I've used them some years back and they were really good, and quite quick at responding. Whether that remains true I have no idea.

0300 200 3300

www.gov.uk/government/organisations/hm-revenue-customs/contact/income-tax-enquiries-for-individuals-pensioners-and-employees

Opening times:

Monday to Friday: 8am to 6pm

Closed on weekends and bank holidays.
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New Wed 16 Feb 22 15:53 
 Income tax on pensions while still working - Falkirk Bairn
The only time I had complications was when I was working part-time and this was self employment.

My tax free allowance was reduced by my State Pension. Pensions taxed at BR and my tuition money added when I did my tax return.

Working say 15 hours a week @ £30/£35 an hour was good money - less petrol money @45p per mile and a few odds and ends in the early 2000s.

HMRC were OK but filling in self assessment forms was a burden. Tick, or not tick a box and all hell could descend on you.

My only pupil today is a granddaughter 2 hours a week for £0
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New Wed 16 Feb 22 15:59 
 Income tax on pensions while still working - RichardW

>>
>> HMRC were OK but filling in self assessment forms was a burden. Tick, or not
>> tick a box and all hell could descend on you.

Ha ha, I did (or didn't) do just that in December, ticked the wrong box (for recovery of the child benefit) and have ended up paying it over 3 months this tax year, rather than 12 next.... tax code went from +5k to -7k overnight. Ooops!

TBH with real time information now on pay the OP's problem should just work out - the allowance will be put against the highest income and will flex up and down depending on other income / tax paid, and should be done automatically. Worth registering for a tax account with HRMC, then you can see the details of the calcs as they happen.
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New Wed 16 Feb 22 17:06 
 Income tax on pensions while still working - martin aston
Thanks Richard. I may well be overthinking this! It will probably just work out. My own (as distinct from my wife’s) dealings with HMRC have been pretty good over the years.
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