State Pension and your tax code - worked examples
These examples show how your tax code is adjusted to take account of the tax you owe on your State Pension. To find out more about how your
tax code is worked out if you get a pension and/or state benefits including the State Pension read the related guide 'Pensions, state benefits and
your tax code' - you'll find the link under 'Further information' at the end of the page.
On this page:
Example of State Pension collected via a company pension provider
Example - tax year 2011-12
You're 67, have retired and get a company pension of £6,000 and a State Pension of £5,577. You're entitled to the full age-related Personal
Allowance for your age-group because your total income before allowances is less than £24,000 - the income limit. Your tax code is adjusted to
collect the tax due on your State Pension out of your company pension like this:
- your age-related Personal Allowance - the amount you can receive tax-free in the tax year is £9,940
- HMRC subtracts your State Pension of £5,577 (this is the taxable income that you are in fact receiving without tax taken off - to take
account of this it's taken from your tax-free Personal Allowance)
- that leaves you with a balance of Personal Allowance of £4,363 (this is the remaining amount of income you can receive without paying tax)
- your tax codes becomes 436P - P indicates entitlement to the full age-related Personal Allowance for the age 65-74 and 436 is the amount
of the allowance with the last number knocked off
- HMRC subtracts the balance of your Personal Allowance (4363) from your company pension (£6,000)
- That means that the amount of company pension you pay tax on is £1,637
Example - tax year 2010-11
You're 67, have retired and get a company pension of £6,000 and a State Pension of £5,077. You're entitled to the full age-related Personal
Allowance for your age-group because of your total taxable incomeis less than £22,900 - the income limit. Your tax code is adjusted to collect
the tax due on your State Pension out of your company pension like this:
- your age related Personal Allowance - the amount you can receive tax-free in the tax year is £9,490
- HMRC subtracts your State Pension of £5,077 (this is the taxable income that you are in fact receiving without tax taken off - to take
account of this it's taken from your tax-free Personal Allowance)
- that leaves you with a balance of Personal Allowance of £4,413 (this is the remaining amount of income you can receive without paying tax)
- your code becomes 441P - P indicates entitlement to the full age-related Personal Allowance for the age 65-74 and 441 is the amount of allowance
with the last number knocked off
- HMRC subtracts the balance of your Personal Allowance (£4,413) from your company pension (£6,000)
- that means that the amount of company pension you pay tax on is £1,587
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Further information
To find out more about how your tax code is worked out if you get a pension and and/or state benefits including the State Pension read the related
guide 'Pensions, state benefits and your tax code'.
Pensions, state benefits and your tax code
Check Income Tax rates and allowances
for tax year 2012-13
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