Tax Free 'Medical Discharge' Pension - Tax deducted from Personal Allowance

[Filthy_contract]

I was discharged from the Services on medical grounds after 30 years' service, and on AFPS 75. Subsequently it was determined that several conditions, including the primary cause, were 'attributable' and thus my pension is paid free of tax. I also get a War Pension as well, and this is also tax free.

I recently started a new role on the Civil Service and have just received my new tax code. It lists my income including my pension, noting it is not taxed, but then I noticed that the tax that would ordinarily be paid (c£10k) is deducted from my personal 'tax free' allowance, meaning that my personal allowance is all but gone.

Now I assume its an error...but an expensive one! I suggest other people who are working but in receipt of a "tax free' pension check their tax code notices.

I've tried ringing HMRC and have written to them; I'll contact FPS this week.

 

[Portree Kid]

Your 30 year AFPS 75 pension will not be tax free

 

[Daxx]

Your 30 year AFPS 75 pension will not be tax free

This.

 

[Filthy_contract]

Your 30 year AFPS 75 pension will not be tax free

It is a Service Invaliding Pension due to a medical condition that is attributable to my service. Veterans UK agreed this in writing and HMRC accept this and Equinity adjusted the monthly payments accordingly. But why then is the tax that I would ordinarily pay of the 'equivalent' AFPS 75 pension then deducted from my Personal Allowance?

 

[Snookie]

Your 30 year AFPS 75 pension will not be tax free

It will be tax free as he has stated that the main medical condition he was medically discharged is what he gets his War Pension for.

 

[Tappet]

@Forces Pension Society Are you able to advise?

 

[Portree Kid]

It is a Service Invaliding Pension due to a medical condition is attributable to my service.

Your AFPS 75 pension is for services rendered ( The 30 years you served )

Your war pension is attributable to your medical condition ( That will be tax free )

 

[Snookie]

Your AFPS 75 pension is for services rendered ( The 30 years you served )

Your war pension is attributable to your medical condition ( That will be tax free )

And his service pension is tax free due to War Pension, I’m in exactly the same situation.

 

[Forces Pension Society]

@Forces Pension Society Are you able to advise?

If his AFPS 75 pension was a Service Attributable Pension, and he is getting a War Pension for the same condition, both will be tax free.

If he left 'normally' (eg. not medically discharged) his pension would be taxable even if, at a later date, he was awarded a War Pension.

 

[Portree Kid]

And his service pension is tax free due to War Pension, I’m in exactly the same situation.

@Forces Pension Society has been paged - We will hear what they have to say.

And has now answered and it could be either option.

 

[Filthy_contract]

If his AFPS 75 pension was a Service Attributable Pension, and he is getting a War Pension for the same condition, both will be tax free.

If he left 'normally' (eg. not medically discharged) his pension would be taxable even if, at a later date, he was awarded a War Pension.

I can't understand why HMRC have deducted 'Less Adjustment for tax bands' the (ordinarily) tax element of my Tax Free pension on my Tax Code Notice. (It is a five figure sum!)

As a member, I'll drop your colleagues a note next week.

 

[Snookie]

@Forces Pension Society has been paged - We will hear what they have to say.

And has now answered and it could be either option.

Really don’t understand what your going on about, it’s not either option it’s fact that if your medically discharged and then receive a War Pension for which the primary condition you were medically discharged is the primary condition in your award of said War Pension, your service pension becomes tax free.
Its not rocket science it’s fact.

 

[dingerr]

I can't understand why HMRC have deducted 'Less Adjustment for tax bands' the (ordinarily) tax element of my Tax Free pension on my Tax Code Notice. (It is a five figure sum!)

As a member, I'll drop your colleagues a note next week.

Have you tried calling HMRC? I find them very good.

 

[Snookie]

I can't understand why HMRC have deducted 'Less Adjustment for tax bands' the (ordinarily) tax element of my Tax Free pension on my Tax Code Notice. (It is a five figure sum!)

As a member, I'll drop your colleagues a note next week.

Mate same thing happened to me a few years ago, my case was due to Equini telling the tax office the wrong information. Spoke to HMRC and was sorted in 5 minutes.

 

[Filthy_contract]

Have you tried calling HMRC? I find them very good.

Yes, I have tried (and agree, they're normally very good) but I think they are swamped by Self Assessment enquiries with returns due by EOM.

 

[Filthy_contract]

Mate same thing happened to me a few years ago, my case was due to Equini telling the tax office the wrong information. Spoke to HMRC and was sorted in 5 minutes.

Thanks. I will try again this coming week.

 

[Forces Pension Society]

Really don’t understand what your going on about, it’s not either option it’s fact that if your medically discharged and then receive a War Pension for which the primary condition you were medically discharged is the primary condition in your award of said War Pension, your service pension becomes tax free.
Its not rocket science it’s fact.

That was what I was saying. The Principal Invaliding Condition which caused the medical discharge has to be attributable for the tax-free status to apply.

A medical discharge (or a normal discharge) with a War Pension being awarded for something else would not result in the tax-free status.

 

[Forces Pension Society]

Mate same thing happened to me a few years ago, my case was due to Equini telling the tax office the wrong information. Spoke to HMRC and was sorted in 5 minutes.

Snookie is right. This is more common than you would think and HMRC are the people to sort it out.

 

[Filthy_contract]

That was what I was saying. The Principal Invaliding Condition which caused the medical discharge has to be attributable for the tax-free status to apply.

A medical discharge (or a normal discharge) with a War Pension being awarded for something else would not result in the tax-free status.

That's exactly the situation I should be in, but HMRC have deducted what I would have paid in tax on my (non) SIP from my personal allowance, making it taxed...at the higher rate.

 

[Filthy_contract]

Hi - an update. I managed to get through to HMRC on the phone on Monday 24 January and they, as ever, were very helpful. I was put through to a technician and he identified that my SIP had been listed as my primary income (it is not) and even though I do not pay any tax on it, it was being counted against my Personal Allowance. Landing on my door mat today (Friday 28 January) is an amended Tax Coding Notice. My salary from my CS role is now my main income and my 'Paymaster' SIP entry the correct tax code of NT is listed, along with 'This Income is Tax Free' and no deductions are made against my Personal Allowance. In the call they suggested that I ring after the start of the new FY just to confirm that switch remains in place.

Net effect: my PAYE deductions have dropped (by quite a bit) and I will get a nice, fat refund at the end of this FY.

Five Star endorsement to HMRC!