PAYE76089 - PAYE operation: pensioners: P161 (Action Guide)

Care should always be taken when entering or updating state pension details in IABD. It is important that state pension details are always entered correctly to

  • Ensure that the tax code is correct
  • Ensure that annual coding calculates the correct amount of state pension for CY+1
  • Ensure that the end of year reconciliation includes the correct amount of state pension

Where you are notified within the first year of state pension commencing of a change to the state pension details held in IABD you should follow the guidance at PAYE130067.

Note: On receipt of form P161(W), follow SPD 6g.1.

On receipt of form P161, follow steps 1 - 33 below. If the individual is in receipt of an occupational pension, you should have an employment record - create one if necessary, PAYE61000 onwards refers. This guide is presented as follows

Signature check Step 1
State pension age and live employment or occupational pension Steps 2 - 8
State pension age but no live employment or occupational pension Steps 9 - 12
State pension age not yet reached Steps 13 - 33

Signature check

1. Check that the P161 has been signed by the individual. If you receive an unsigned P161 and the information provided affects age-related allowances you should return it to the individual for signing
  Notes:
a. The P161 should also be sent back if signed by an agent and the information affects age-related allowances. The P161 must always be signed by the individual in these circumstances.
b. Where there has been a delay of between one and six months in processing form P46(DWP) and / or form P161, automatic coding of state pension may have occurred. See PAYE76086. As only the basic amount of state pension will have been coded, you should update IABD to reflect the amount of state pension advised by the individual or provided by DWP.

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State pension age and live employment or occupational pension

2. Check if state pension has been deferred
 
  • If it has not been deferred see step 3 below
 
  • If the deferral date is in CY, follow the guidance at PAYE76125 then the appropriate step from steps 13 - 33 below
 
  • If the deferral date is in CY+1 or beyond (using creation source ‘P161’) withdraw any flat rate expenses, professional subscriptions, job expenses or tips that are no longer due from the year following cessation of employment
 
    • Issue any revised tax code
 
    • Update Contact History
3. If a live Incapacity Benefit or Jobseekers Allowance source is held
 
  • Potentially cease these sources
 
  • Apportion the amount of Incapacity benefit and Jobseekers Allowance up to the start date of the pension and make a note of the figure
 
  • Update source status, if remaining live source(s) are secondary
4. If both a live employment and occupational pension is held, decide which will be the primary source; consider the annual estimated pay from each source and whether the employment is likely to continue
5. If an employment source has ceased, withdraw any flat rate expenses, professional subscriptions, job expenses and tips no longer due from the year following cessation of employment
6. Review IABD, and
 
  • Update with the details on the P161, apportioned Incapacity Benefit and Jobseekers allowance amounts
 
  • Enter state pension details as follows
 
    • If a P46(DWP) is attached or details are in Contact History notes, follow SPD 6g.2
 
    • If no P46(DWP) received, update IABD with state pension details, see SPD 6g.3, and return to steps 7 and 8 below
 
  • Where you have full income details in IABD, enter the estimated income where required, in accordance with PAYE13085 
7. Issue a revised tax code
8. Update Contact History

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State pension age but no live employment or occupational pension

Use all the information on the P161 and P46(DWP) if held, to decide whether the individual will have tax liability now or in future. If the individual has an address abroad, see guidance at PAYE13144 relating to Section 810 claims when considering liability.

No likelihood of future employment or liability

9. If a live individual record is held, record the P161 information in Contact History
 
  • Use OCA to write to the individual asking them to contact HMRC if their financial circumstances change in the future, as this may affect their tax liability
10. If no live individual record is held, scrap the P161
 
  • Use OCA to write to the individual asking them to contact HMRC if their financial circumstances change in the future, as this may affect their tax liability

Continuing liability and no PAYE source to code state retirement pension

11. Set up a Self Assessment record or re-open a dormant one. See the Self Assessment Manual (SAM100000 onwards)
12. Update Contact History

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State pension age not yet reached

Occupational pension but no state pension

13. Review IABD for CY and CY+1 (using creation source ‘Other Form’), withdraw any flat rate expenses, professional subscriptions, job expenses or tips no longer due from the year following cessation of employment
14. Issue any revised tax code
15. Update Contact History

Occupational pension plus further employment

16. Decide which will be the primary source; consider the annual estimated pay from each source and whether the employment is likely to continue
17. Review the tax coding
18. Update Contact History

Occupational pension plus jobseekers allowance

19. Set up a primary source record for the benefit claim
20. Estimate the amount of JSA using the Claims History, P242 and the information provided on the P161
21. Enter the calculated figure on the Employment Estimated Earnings screen for the JSA employment. It must not be entered on the IABD Taxable Social Security Benefits screen
22. Issue a P6U to the Department for Work and Pensions (DWP) Office, on a week 1 / month 1 basis and issue the revised secondary source code to the pension provider
23. Update Contact History

Occupational pension and incapacity benefit

24. Set up a secondary source record for the IB claim. (This text has been withheld because of exemptions in the Freedom of Information Act 2000) 
25.
  • Set creation source ‘User’
 
  • Show job title as ‘Incapacity Benefit’
 
  • Enter the start tax code as ‘NT’, select [Save]
26. Update Contact History and enter the incapacity benefit rate using SEES OCA notes paster for coding incapacity benefit
27. Update IABD to include the IB deduction in the occupational pension primary tax code
28. Issue the DWP stencil - OCCPEN Cases Only from SEES OCA Letters and Forms to the DWP

Occupational pension and employment and support allowance

29. Set up a secondary source record for the ESA claim. (This text has been withheld because of exemptions in the Freedom of Information Act 2000) 
30.
  • Set creation source ‘User’
 
  • Show job title as ‘ESA Award’
 
  • Enter the start tax code as the tax code currently in operation (when the ESA source was the primary source), select [Save]
31. Update IABD to include the ESA deduction in the occupational pension primary tax code
 
  • Enter the actual ESA benefit received
 
  • Enter start date as 06/04/CY
32. Issue tax code to the primary occupational pension
33. Issue tax code BR, using a manual P6U, to the Department for Work and Pensions (DWP) Office for the ESA secondary source

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