Question
I have just received my first monthly pension payment from a previous employment, which has been taxed as if it is my only income. I am still working and paying tax at higher rates on my salary. How will this be adjusted on PAYE or will it only be resolved with my annual return?Answer
It sounds as though your previous employer's pension administrator is using the wrong tax code - it should have been the same code as used by your current employer.
If you pay too little tax via PAYE then your first step should be to contact HMRC and tell them. They will normally revise your tax code for the current tax year to ensure the correct amount of tax is deducted moving forwards then adjust your tax code for the following tax year to collect the underpayment(s) (effectively by reducing your personal allowance). There is also the option to pay the tax owed as a lump sum now, which would probably mean the tax code used by your current employer being unaffected.
Either way, once you've sorted this with HMRC you should tell the pension administrator the tax code to use so that they deduct the correct amount of tax in future.
Yes, you could instead pay the tax owed via your tax return, but in this instance it's probably simpler to just get a revised tax code.
Just for reference, underpayments of £2,000 or more can't be collected via PAYE, HMRC will likely ask you a lump sum or series of instalments in such cases.
Note: it's not unknown for HMRC to make mistakes when issuing tax codes, so it's always worth checking any codes they send you. Read my article here on how to do this.
I have just received my first monthly pension payment from a previous employment, which has been taxed as if it is my only income. I am still working and paying tax at higher rates on my salary. How will this be adjusted on PAYE or will it only be resolved with my annual return?Answer
It sounds as though your previous employer's pension administrator is using the wrong tax code - it should have been the same code as used by your current employer.
If you pay too little tax via PAYE then your first step should be to contact HMRC and tell them. They will normally revise your tax code for the current tax year to ensure the correct amount of tax is deducted moving forwards then adjust your tax code for the following tax year to collect the underpayment(s) (effectively by reducing your personal allowance). There is also the option to pay the tax owed as a lump sum now, which would probably mean the tax code used by your current employer being unaffected.
Either way, once you've sorted this with HMRC you should tell the pension administrator the tax code to use so that they deduct the correct amount of tax in future.
Yes, you could instead pay the tax owed via your tax return, but in this instance it's probably simpler to just get a revised tax code.
Just for reference, underpayments of £2,000 or more can't be collected via PAYE, HMRC will likely ask you a lump sum or series of instalments in such cases.
Note: it's not unknown for HMRC to make mistakes when issuing tax codes, so it's always worth checking any codes they send you. Read my article here on how to do this.
Read this Q and A at http://www.candidmoney.com/questions/question403.aspx
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