No matter how old you are or how long you have paid tax for, if your income is high enough, you will still have to pay tax when you retire. Income can include...
- Your pension from us
- State pension and other pensions
- Unemployment benefit
- Wages from other jobs
- Interest on some savings
Just like at work, you have an allowance - an amount of income you are allowed to bring in free of tax. For more about the most recent personal allowances, please see our Grapevine newsletter.
When you first retire
If you won't have reached State pension age by 5 April
We will use the same tax code you had at work and as soon as we receive your P45 (see below), we will use the pay and tax figures on that too.
If you will have reached State pension age by 5 April
We will use a special tax code, BR, which means every pound of your pension will be taxed. This is to try to stop you paying too little tax, because it is likely that the code eventually issued by the tax office will probably be much lower than the one used whilst you were working. One reason for this is that the code is adjusted to take into account the amount of State pension you draw.
The tax office may take some time to sort out what tax you should pay but as soon as they do, they will write and tell you. They will also send the same details to us, so if you have paid too much or too little tax, we can normally put this right through your pension. But if it isn’t sorted out by the end of the tax year, you will have to deal with the 'taxman' directly.
When you stop work for your employer, they will have to fill in your pay and tax details on a form called a P45, and send it to us. As soon as we get it, we will send it on to the tax office.