Discussion in 'Armed Forces Pension Scheme' started by Seedubs, Jun 17, 2008.

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  1. Can someone confirm that your pension is treated as a second employment and taxed at the Basic Rate? My pension started in April and was taxed under my normal tax code and now in May it has changed to a tax code of Basic Rate (almost double the tax I was paying). I rang the tax office and they said its correct.....

    I was under the impression your pension was added to your income from whatever job you were doing and then your tax was based on the total?
  2. Yup. It's treated as income and grossed up with any other income for tax purposes.
  3. Sorry but did that answer mean they are wrong to treat it as a second income and tax it at the basic rate?
  4. From my short experience of the system, the tax people seem to assume that you've gone straight into other employment and having applied your personal allowance for that income, tax your pension at the basic rate (20% of the whole pension).

    I've had to write several letters to them to get my code changed so that my pension (only income at moment) is taxed after the personal allowances have been applied.

    Hope this helps.
  5. Correct your pension is taxed @ Basic Rate with none of your personal allowances set against it. Remember too there maybe an extra liability if pension + your normal pay takes you into the 40% bracket and if at present you are only paying 20% on your normal income.

    If you wish your allowances set against your pension, ie you have no other earned income, then send your P45 to PD2 @ Cardiff.