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PAYE problems for pensioners
11th May, 2011
Smailes Goldie Chartered Accountants, in Hull and Barton-upon-Humber, are warning taxpayers who started receiving their state pension in 2010/11 may not have this adjusted in their PAYE code for 2010/11 and 2011/12.
Jeremy Allison, Partner, Smailes Goldie, said:
"The state pension is classed as taxable income, but it is paid without any tax being deducted. Anyone who is in receipt of other taxable income, such as employment, which is in excess of their annual personal allowance, will more than likely have need to pay tax on their state pension.
"For those who are employed and who also receive a state pension, the easiest way for the tax to be collected is to adjust their PAYE tax code. The DWP will normally tell HMRC when it starts to pay a state pension so that the code number for a tax year can be adjusted accordingly.
"However, when this has not been done, it is unlikely the code number would have been adjusted, meaning that there will have been an underpayment."
Where the underpayment is less than £2,000, the tax outstanding will be collected by adjusting future years' PAYE codes. However, if the underpayment is more than £2,000, then the payment will need to be made on 31st January following the end of the tax year or HMRC may allow taxpayers to pay over three years via your code number, commencing from 2012/13.
This is the latest in a line of problems with coding notices issued by HMRC's National Insurance and PAYE Service (NPS) computer.
