Tips on tax codes for pensioners

Published on 9 February 2004

Just before the start of the new tax year in April, the Revenue will send many pensioners a new tax code. Always check this code for errors. Here are some areas where things can go astray.

Check your personal allowance

The rates of allowances used in this article are for the tax year 2004/05 starting on 6 April 2004.

If you will not become 65 before 6 April 2005 then your allowance should be £4,745.

If you will be at least 65 by 5 April 2005 but not 75 by that date then your allowance should be £6,830.

If you will be 75 before 6 April 2005 then your allowance should be £6,950.

If you get the higher allowance for being 65 or over, you may have the allowance reduced because of your income. Click on the Relevant link at the bottom of the article to see a summary which sets out how the rules work. Bear in mind that the limit for 2003/04 was £18,300 and for 2004/05 will be £18,900.

Do not assume the Revenue know how old you are.

Check your entitlement to married couple's allowance (MCA)

You can be entitled to MCA if you or your spouse was born before 6 April 1935.

The rules for this tax relief can be found at: /help/pensioners/taxbasics/special.cfm#MCA

Bear in mind that just like your personal allowance, MCA can be reduced because of the level of your income.

This rather strange 'allowance' actually only gives you tax relief at 10% of the allowance quoted so if your MCA is £5,725 you will get £572.50 taken off your tax bill.

If MCA is put in the coding notice of someone who pays tax at more than 10%, then there has to be a restriction included in the coding as well, otherwise you will get too much tax relief.

This restriction should always be checked as it is likely to be based upon a Revenue estimate.

In recent months our tax clinics have found a number of people where the Revenue have failed to include any restriction at all in their coding notices when there should have been one. This can lead to a large underpayment building up.

If this has happened to you and you need advice, you can write to us using the Contactfacility which is in the toolbar at the top of each page of the website.

Watch the amount of state pension included in your coding

Sometimes the amount included in your coding by the Revenue is an estimate despite being shown as a very specific figure. They will not necessarily tell you that this is so.

Work out how much pension you will actually receive in the year and check it against the figure included.

Contact Name: Sue Jones (Tel: 0844 579 6700, Fax: 0844 579 6701)

(09-02-2004)

Relevant Link: Reduction in allowances for incomes over £18,900 (2004/05)