Reader’s Question – Tax and pensions

Another reader's question answered.

Question

I’ve got a small works pension of £94.04 a month.

I have always paid £5 tax on this, but now since April they have given me £99.04 a month £5 more, but now they are taxing me £13.40 a month, my tax code is 37T.

I am a retired pensioner, only receiving £12.000 a year, surely this cant be right.

George.

My response

George,

I’ll try and piece together the information that you’ve given me and come up with a couple of suggestions.

You say you are receiving £12,000 a year, but I’m guessing that this is from some other source and is not in reference to your small work pension – given the small monthly payments you receive.

Now it would seem that the tax being deducted from your small pension is consistent with your tax code 37T. You can see this is you use the following online calculator.

So the question then becomes is your tax code correct? As I don’t know your full circumstances I can’t advise you on this. So I suggest that you first read the following section on the HMRC website (click here) and my article ‘’Money tip #4 – Check your tax code’. These explain how you can check whether your tax code is correct and then how to rectify any mistakes.

Also, check whether your tax code has changed since last tax year (which ended on 5^th April 2010) as this may explain why you are now paying more tax, proportionately.

Your other point is with regard to your pension increasing. Contact your pension provider (or the trustees) and ask them why your pension has gone up. One possible explanation is an annual inflationary increase.

I hope that helps – and good luck.

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