State Pension - Tax Return

[XFool]

Unfortunately, I've chucked away the instructions for the paper version, but I notice on the paper return it says "the amount you were entitled to receive, not the weekly or 4 weekly amount".

I've always assumed the they actual pay me the amount I am entitled to receive - maybe a folly to do that - so I just list all the payments received in the tax year and declare that. I don't see how that could be wrong since it is the actual income I have received.

Yes. That is what I used to do (having made up my own mind on this in the face of seemingly confusing and contradictory advice).

This meant that most years I altered the HMRC's own figure in the SA box for my SP - sometimes up a little, mostly down a little. I reckoned, like you, as it was what I had actually received in SP, it would work out correct over a cycle (4 years?); barring any sudden changes in tax rates. The most commonly accepted approach is the well known "13 times usual monthly amount" (or its equivalent: 52 times normal weekly amount), but this figure is slightly too high (because of trailing years lower weekly SP). Over time it seemed to me it can only become cumulatively higher, not self correct. Which is why I didn't use it.

With my recent SA, following the online HMRC notes I used the 51 + 1 method. Coincidentally or not, this calculation gave a figure exactly the same as HMRC's pre-entered figure for my SP. So I will follow this method in future.

I am wondering now: Is there any difference between 51 + 1 and my "as received in year"?

Might look into this more, just out of pure curiosity.

[Arborbridge]

Unfortunately, I've chucked away the instructions for the paper version, but I notice on the paper return it says "the amount you were entitled to receive, not the weekly or 4 weekly amount".

I've always assumed the they actual pay me the amount I am entitled to receive - maybe a folly to do that - so I just list all the payments received in the tax year and declare that. I don't see how that could be wrong since it is the actual income I have received.

Yes. That is what I used to do (having made up my own mind on this in the face of seemingly confusing and contradictory advice).

This meant that most years I altered the HMRC's own figure in the SA box for my SP - sometimes up a little, mostly down a little. I reckoned, like you, as it was what I had actually received in SP, it would work out correct over a cycle (4 years?); barring any sudden changes in tax rates. The most commonly accepted approach is the well known "13 times usual monthly amount" (or its equivalent: 52 times normal weekly amount), but this figure is slightly too high (because of trailing years lower weekly SP). Over time it seemed to me it can only become cumulatively higher, not self correct. Which is why I didn't use it.

With my recent SA, following the online HMRC notes I used the 51 + 1 method. Coincidentally or not, this calculation gave a figure exactly the same as HMRC's pre-entered figure for my SP. So I will follow this method in future.

I am wondering now: Is there any difference between 51 + 1 and my "as received in year"?

Might look into this more, just out of pure curiosity.

I like the joke "the usual amount" - what is that? is that what you get for 12 months of the year, or most weeks of the year? the odd one out being "the usual amount" for the previous year. It seems to me a loose phrase. I would have thought one should not be taxed on some throwaway "usual" amount, but on the actual amount, as you would be for every other form of taxable income.

None of this is surprising, I suppose. Trust the HMRC to make something so simple become complex. They are the only business I deal with which issues statements after assessment which make little sense unless one is psychic, and when they tell me what I owe*, I certainly never trust it because it seems to alter according to the wind direction.
It all reminds me of Douglas Adams idea in the Hitch Hikers guide of "Bistro maths".

*I usually end up checking my online account for months afterwards just incase they've decided to reinvent something and levy a fine.

Arb.

[Lootman]

Unfortunately, I've chucked away the instructions for the paper version, but I notice on the paper return it says "the amount you were entitled to receive, not the weekly or 4 weekly amount".

I've always assumed the they actual pay me the amount I am entitled to receive - maybe a folly to do that - so I just list all the payments received in the tax year and declare that. I don't see how that could be wrong since it is the actual income I have received.

In the past I have come across cases where the actual amount received is not used but rather the amount accrued during that time period. Rent is one example, where the April rent payment received on April 1st is pro-rated across the month, and so is split between two tax years. So the concept of taxing on an accrual basis rather than a receipt basis does exist.

But unless the amounts involved are significant it really does not matter. I suspect that any reasonable approach will be accepted whether based on actual payments or on theoretical payments. The one important thing is to be consistent.

Obviously anyone with an accountant is going to follow the accountant's advice. And 52 times the cited weekly amount is that advice and happens to be the simplest since it needs no scrutiny of actual amounts.

I did once get a backdated payment of some under-paid state pension and, as best I recall, I declared that extra amount in the tax year it was paid.

[XFool]

I like the joke "the usual amount" - what is that? is that what you get for 12 months of the year, or most weeks of the year?

It is the weekly amount, as notified in your annual Pension Service statement about "the amount of benefit you receive" from the start of the relevant tax year.

the odd one out being "the usual amount" for the previous year. It seems to me a loose phrase.

It simply means the same thing as above, but for the preceding tax year.

[Arborbridge]

I like the joke "the usual amount" - what is that? is that what you get for 12 months of the year, or most weeks of the year?

It is the weekly amount, as notified in your annual Pension Service statement about "the amount of benefit you receive" from the start of the relevant tax year.

the odd one out being "the usual amount" for the previous year. It seems to me a loose phrase.

It simply means the same thing as above, but for the preceding tax year.

That's not what happens - that is my point. The first amount is always the same rate as the previous tax year, not the current tax year. So the first month is paid a different amount and that is what I declare - along with all the other payments at the new amount - that's 13 payments in total. They've never objected to that method because is does, after all, declare what I've been paid.
As I said, trust the HMRC to make something simply into a one which raises questions. As with their statements, they have their own logic which is different to the rest of the world.

Arb.

[XFool]

It is the weekly amount, as notified in your annual Pension Service statement about "the amount of benefit you receive" from the start of the relevant tax year.

It simply means the same thing as above, but for the preceding tax year.

That's not what happens - that is my point. The first amount is always the same rate as the previous tax year, not the current tax year.

Err... That is entirely the point.

Try it turned the other way around - "1 + 51" - does it make sense now? (This is my terminology, BTW)

[Arborbridge]

That's not what happens - that is my point. The first amount is always the same rate as the previous tax year, not the current tax year.

Err... That is entirely the point.

Try it turned the other way around - "1 + 51" - does it make sense now? (This is my terminology, BTW)

I thought you were arguing that it was something different.

[XFool]

I am wondering now: Is there any difference between 51 + 1 and my "as received in year"?

Might look into this more, just out of pure curiosity.

"Well! What do you know?"

I said I would look into this matter further and I have. The answer is now definitive.

I have done the maths with every recorded weekly SP I have from 2013 to 2023. That is 1 * (Last year's weekly SP) + 51 * (This years's weekly SP) and compared it with Total SP received in Tax Year, 13 * Monthy SP and HMRC's figure for my SP in my annual Notice of Tax Coding (presumably the same figure as that used to pre-populate the online SA).

As I said, the answer is definitive - if you want to argue, don't argue with me, argue with numbers and the laws of arithmetic...

The answer is: The "1 + 51" rule has it!

Bearing in mind HMRC 'chops' figures to zero decimal places, in every single case from 2013 to 2023 the computed "1 + 51" figure is identical to the HMRC quoted figure (in Tax Coding notice). The received in year figure is not, nor is the 13 * Monthly etc. So, that is how HMRC calculates this figure. No room for discussion, never mind what you "thought", what you were "told", what you "understood", what the "institute of accountants said", what your "accountant told you", this is how HMRC does it!

QED

Still not satisfied? Just do the calculation for yourself using your own figures.

AFAIAC, the only remaining mystery is: Why has HMRC not simply told us this before now?

[Lootman]

Why has HMRC not simply told us this before now?

Probably because it is not that bothered how you report it as long as you use a reasonable method, are consistent about it, and the resultant number is fairly accurate. It quite simply is not worth their time and effort to quibble about pennies of difference. A case of "close enough is good enough".

That is why you, me and Arb all use different methods and they are all accepted. It's just not that important as the results are very similar.

[chas49]

For what it's worth, the prepopulated figure on my Tax Return agrees to the penny with this:

pension payments received PLUS (current 4-weekly pension/28 * (days from last payment to end of tax year))

I can't do the 1 + 51 calculation as my SP started in the tax year 22/23

I get that the differences are tiny on a rolling basis when dealing with full years, but is there a special case for the year in which you start receiving SP?

I received 8 monthly payments in the year - the last one being on 28 March. HMRC are adding on the 'accrued' pension up to 5 April.

If they do the same calc next year and thereafter, it's clearly fine. But will they?

[genou]

I received 8 monthly payments in the year - the last one being on 28 March. HMRC are adding on the 'accrued' pension up to 5 April.

If they do the same calc next year and thereafter, it's clearly fine. But will they?

Yes, they will. State pensions are taxed on an accruals basis.

[Lootman]

I received 8 monthly payments in the year - the last one being on 28 March. HMRC are adding on the 'accrued' pension up to 5 April.

If they do the same calc next year and thereafter, it's clearly fine. But will they?

Yes, they will. State pensions are taxed on an accruals basis.

Indeed but not everyone relies on the taxman computing the amount. So I need to manually come up with my own number each year. I use the weekly amount times the number of weeks, rounded if necessary. That is always accepted in my experience. I imagine that the taxman ignores any discrepancy that is less than, say, 1%. So any reasonable method is good enough whether based on days, weeks, months or actual receipts.

This thread has certainly rambled around in circles. The correct answer was given in the first couple of replies and now there are 51 replies!

[XFool]

This thread has certainly rambled around in circles. The correct answer was given in the first couple of replies and now there are 51 replies!

Err... Not really.

The "answer" given in the first couple of replies was the usual HMRC type answer: "The amount you are due in the year" OK. So what's that?

Now we know what "that" actually is, by HMRC rules. Simple at last!

"51 replies" - So now there are 1 + 51. Which is exactly right.

[Lootman]

This thread has certainly rambled around in circles. The correct answer was given in the first couple of replies and now there are 51 replies!

Err... Not really. The "answer" given in the first couple of replies was the usual HMRC type one: "The amount you are due in the year". OK. So what's that?

The "amount you are due" is just another way of saying that the SP is taxed on an accrual basis, and not necessarily on the amount you actually received. That statement was made both by bluedonkey and mc2fool in the 1st and 2nd reply to the OP, and backed up by others.

Some people maybe did not understand what that means, but it was clear enough to most of us here.

[XFool]

Err... Not really. The "answer" given in the first couple of replies was the usual HMRC type one: "The amount you are due in the year". OK. So what's that?

The "amount you are due" is just another way of saying that the SP is taxed on an accrual basis, and not necessarily on the amount you actually received. That statement was made both by bluedonkey and mc2fool in the 1st and 2nd reply to the OP, and backed up by others.

Some people maybe did not understand what that means, but it was clear enough to most of us here.

Ah. So you all 'knew' it was 1 + 51 all along? Rather like HMRC, you took a powerful long time to tell the rest of us.

And why then do you/does your accountant use another method?

[Lootman]

The "amount you are due" is just another way of saying that the SP is taxed on an accrual basis, and not necessarily on the amount you actually received. That statement was made both by bluedonkey and mc2fool in the 1st and 2nd reply to the OP, and backed up by others.

Some people maybe did not understand what that means, but it was clear enough to most of us here.

why then does your accountant use another method?

He doesn't, he uses the accrual method. That is accepted as correct by the taxman, which is all I care about.

[XFool]

why then does your accountant use another method?

He doesn't, he uses the accrual method. That is accepted as correct by the taxman, which is all I care about.

I thought you told us he/or you used 13 * Monthly?

BTW. Saying he uses the "accrual method" just tells us the same thing HMRC used to say: "The figure is the amount due in the year, not that received".

We all knew that all along! The question has always been: "So how do I work that out, simply - an actual figure?"

[Lootman]

He doesn't, he uses the accrual method. That is accepted as correct by the taxman, which is all I care about.

I thought you told us he/or you used 13 * Monthly?

No.

[XFool]

I thought you told us he/or you used 13 * Monthly?

No.

Err...

I have an accountant do my taxes and in regards to the state pension he asks me just one question: What was the DWP statement of the weekly amount you receive for that tax year?

He takes that number and multiplies it by 52. Couldn't really be easier and certainly easier than looking up the dates and amounts of 13 payments!

[Lootman]

No.

Err...

I have an accountant do my taxes and in regards to the state pension he asks me just one question: What was the DWP statement of the weekly amount you receive for that tax year?

He takes that number and multiplies it by 52. Couldn't really be easier and certainly easier than looking up the dates and amounts of 13 payments!

Correct, he uses the stated weekly amount and not the actual 13 payments which in any event are 4-weekly and not "monthly".