HMRC has announced new tax codes for state pensioners who received £300 Winter Fuel Allowances. If your total income exceeds £35,000, HMRC will reclaim the Winter Fuel Payment. Importantly, your partner's income does not count towards your total.
How Tax Codes Are Calculated for Basic Rate Taxpayers
HMRC provides an example on its website for basic rate taxpayers. The Labour government's tax authority states: "Your total income is £37,710. This is made up of £25,737 from a private pension and £11,973 from your State Pension. In December, you received a £200 Winter Fuel Payment. Your Personal Allowance is £12,570."
HMRC explains: "We will reduce your tax-free amount by £11,973 (your State Pension) or 1,000 (1,000 × 20% = the £200 Winter Fuel Payment you need to repay). This is your total deductions." It adds: "£12,570 (Personal Allowance) – £12,973 (total deductions) = –£403 of tax-free allowance."
As you have negative allowances, to collect the correct amount of tax, HMRC replaces the minus sign with a K, removes the last digit, and reduces by one. Your new tax code becomes K39. This means you will pay extra tax on £399 of income, resulting in approximately £17 more tax per month.
Higher Rate Taxpayer Example
For higher rate taxpayers, HMRC gives another example: "Your total income is £65,300. This is made up of £53,327 from a private pension and £11,973 from your State Pension. In December, you received a £200 Winter Fuel Payment. Your Personal Allowance is £12,570. We will reduce your tax-free amount by £11,973 (your State Pension) or 500 (500 × 40% = the £200 Winter Fuel Payment you need to repay). This is your total deductions."
It continues: "£12,570 (Personal Allowance) – £12,473 (total deductions) = £97 of tax-free allowance." Your new tax code is 9L.
