HMRC update over fears tax code change could affect state pension | Personal Finance | Finance

HMRC has explained how tax codes relate to the state pension after a man was alarmed to see his code had changed.

The man contacted the tax authority over social media site X to ask: “I have just been entitled to make state pension this month.

“However, I am concerned as you have applied a full year to my tax code on one of my pensions. I will not receive a full amount this tax year only 41 weeks of state pension. I have written you a letter for help.”

The group responded to ask him to clarify something about his current tax code. A representative said: “Is the tax code followed by an X, W1 or M1, as that means it will not be used for the whole year, just for the remainder of the year?”

The man explained: “Iit has been added to one occupational pension the code starts with a K and ends with an X.”

HMRC explained: “That is actually only going to be used for part of the year, so although it’s using the full year value, the code will only be used on the later part of the year, so you don’t pay too much tax.

“It’s because the tax code itself is always based on annual figures.”

The full new state pension is currently £221.20 a week and you typically needs 35 years of National Insurance contributions to get the full amount.

State pension payments increased 8.5 percent in April in line with the triple lock, which guarantees payments go up in line with the highest of 2.5 percent, the rise in average earnings or inflation.

A pensioner recently contacted HMRC as they were due a tax refund, to ask when it would arrive.

They said: “I took a small pot pension in February and as I don’t have any other income should get my tax back and wondered in what timescale this might be.

“I cashed a small pot pension a few years ago and think I got a letter at the end of June telling me what refund I’d get.”

The group said in response: “We started working through everyone’s records earlier this month.

“We aim to complete by November, you’ll get a notification from us when we do check your record, and you’ll be able to claim a refund here.”

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