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Pension/Wage vs Tax

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Pension/Wage vs Tax

Old 22nd Mar 2023, 11:31
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Pension/Wage vs Tax

Hello, one for those who have left in recent terms....

What is the best way to allocate ones tax free allowance against the service pension and my new civvy wage?

I've heard some people say put it against the SP as I will get that till death, but others say put it against the civvy wage?

Is there an advantage or reason to do one or the other, and how do I tell HMRC which to put the allowance against?

Thanks
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Old 22nd Mar 2023, 13:34
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Not aware you'll get a choice. HMRC will just lump it all together, take off the tax free allowance and deduct tax at 20% on the next 37,699 above the TFA and 40% above that

Income Tax rates and Personal Allowances : Current rates and allowances - GOV.UK (www.gov.uk).

I don't know if a service pension is taxed at source but the standard old age pension isn't so you'll end up having to fill in a tax return which HMRC will use to correct anything not captured as PAYE.
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Old 22nd Mar 2023, 13:37
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Mine is against my service pension, I have to self assess every year, was asked by HMRC which one I wanted it against and because my service pension is a constant, it was a no brainier for me.

Last edited by WillNorris81; 22nd Mar 2023 at 18:02.
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Old 22nd Mar 2023, 17:15
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Not aware you'll get a choice. HMRC will just lump it all together, take off the tax free allowance and deduct tax at 20% on the next 37,699 above the TFA and 40% above that
I'm sure I got a choice - as Will, I chose my service pension, being larger than my Civil Service one. If you leave it to HMRC they will ask for a tax return every year to adjust things.

Also because my RAF pension was paid from an earlier age it made sense to allocate my tax free allowance to the pension, which, until age 55 was a constant.

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Old 22nd Mar 2023, 17:18
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Once you are only relying on your service pension, it is taxed at source.

When I was in receipt of my service pension and a civvy wage they were handled by different tax offices but the tax code on my PAYE for civvy wage was adjusted to take the pension into account.
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Old 22nd Mar 2023, 18:07
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I have my mil pension taxed at flat rate 41% (I’m in Scotland), Standard rules apply to the salary. This way I know I’m not going to get some unexpected tax bill because the HMRC computer decided to do something weird.
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Old 23rd Mar 2023, 05:54
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When I left, HMRC, via Ty Glas Road, took my RAF pension as my primary income and offset all my allowances against it. All other incomes were taxed at the base or higher rate. I had to do an annual return. I have now fully retired and things are the same, my service pension is my primary income and my other pensions are taxed at the basic rate.. It makes life easier to have your service pension as the primary one as it is for life.
The only problem I had was convincing my new, post RAF, employer that my salary wasn't my only income and not to treat it as such. It didn't happen to me but I do know people who had a second set of allowances set against their new salaries and ended up with rather a large bill when HMRC caught up with them.
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Old 23rd Mar 2023, 08:17
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Originally Posted by downsizer
Hello, one for those who have left in recent terms....

What is the best way to allocate ones tax free allowance against the service pension and my new civvy wage?

I've heard some people say put it against the SP as I will get that till death, but others say put it against the civvy wage?

Is there an advantage or reason to do one or the other, and how do I tell HMRC which to put the allowance against?

Thanks
Set mine up online mate, personally I prefer to pay the BR against my pension as it's a set amount no matter what circumstances are around the corner.

https://www.tax.service.gov.uk/check...income-summary
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Old 23rd Mar 2023, 08:25
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Originally Posted by mad_collie
Set mine up online mate, personally I prefer to pay the BR against my pension as it's a set amount no matter what circumstances are around the corner.

https://www.tax.service.gov.uk/check...income-summary
Thanks mate, hope you are well.

This is what I was getting at, I assume for a few months it will be a mess as i will be getting RAF wage + Civvy wage for about 6 weeks, then pension + civvy wage.

I assume I can just follow that link and allocate the BR against the pension once it shows up?
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Old 23rd Mar 2023, 08:26
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Also, why are people doing self assessment?

Can't see the need for that unless you have some unusual circumstance?
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Old 23rd Mar 2023, 08:41
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Originally Posted by downsizer
Thanks mate, hope you are well.

This is what I was getting at, I assume for a few months it will be a mess as i will be getting RAF wage + Civvy wage for about 6 weeks, then pension + civvy wage.

I assume I can just follow that link and allocate the BR against the pension once it shows up?
All good thanks, pretty sure that's what I did when I set up the 2 incomes online.

My only regret was taking the hit on tax while I had RAF wage + Civvy wage. It would have been better to have salary sacrificed it all into the new workplace pension rather than give a LOT to the tax man.

I could have taken it back tax free when I turned 55 if required.
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Old 23rd Mar 2023, 08:49
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Originally Posted by downsizer
Also, why are people doing self assessment?

Can't see the need for that unless you have some unusual circumstance?
Income in excess of 100k
Rental Income
Dividend over a certain amount
Self Employment.
Foreign Income
Foster Carer
High Income Child Benefit Charge - Earning over 50k and receiving Child Benefit

Quite a few reasons tbh, those above are just a few.

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Old 23rd Mar 2023, 13:04
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Originally Posted by downsizer
Also, why are people doing self assessment?

Can't see the need for that unless you have some unusual circumstance?

I have a buy to let property.
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Old 23rd Mar 2023, 13:17
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Originally Posted by WillNorris81
I have a buy to let property.
Yes that was one of the instances I was thinking of.
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Old 23rd Mar 2023, 18:15
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Originally Posted by downsizer
Also, why are people doing self assessment?

Can't see the need for that unless you have some unusual circumstance?
depends on what income is being taxed at source

if , as many service leavers post immediate pension point, you have the service pension and a PAYE wage both of which can be taxed at source and your income from interest and dividences falls within the interest and dividends allowance there is little need to have tax return ...
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Old 23rd Mar 2023, 18:20
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Downsizer - my PAS pension and my salary (flying job) took me over 100K so I had to complete self assessment. Retired now so no problem.
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Old 23rd Mar 2023, 18:25
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In my experience, HMRC rarely take the right amount of tax even though my tax affairs are fairly simple. Some years, they would be some hundreds over, for no obvious reason, other times equally out the other way. For that reason, I opted years ago to do Self Assessment, to ensure that I pay the correct amount.
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