Interesting tax situation on State Pension

Just checking my father-in-law's tax affairs at the end of the tax year. He is 97, and I have Power of Attorney for him. He receives an occupational pension, and a state pension. The tax code on his occupational pension is adjusted to allow for his state pension. PAYE usually gets everything correct, and he isn't asked to submit a tax return.

His state pension is paid weekly on Thursdays. Tax year 2006/7 began and ended on a Thursday - and thus had 53 of them. So he received 53 weeks worth of pension in the tax year, but his tax code was calculated on the basis of

52 weeks.

Does that mean that, technically, he owes the tax man 22% of one week's state pension? I'm certainly not going to tell the tax man - and chances are that it will go unnoticed.

Reply to
Roger Mills
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For sure, it's scarcely cost-effective for anyone to try to collect this.

But if you did the calcs, you may find slightly more than 22% is due, because (a) if total taxable income is within the appropriate band, then his higher pers.allowance would be reduced by £1 per £2 "extra" income (hence an effective marginal tax rate of 33%); and (b) very trivial, but the way PAYE handles tax codes, your FiL's correct allowances could be up to £9 pa less than he gets when using the code.

Reply to
Martin

Yes, he's underpaid by 19.61 [1], whereas 22% of one week's pension is

18.77 - the difference being within the PAYE 'noise'. [His total income is insufficient for him to start losing Age Allowance]. [1] by my calculations. The tax man would do a bit of rounding down, and get a slightly lower figure
Reply to
Roger Mills

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