State pension and national insurance benefits

State pension and national insurance benefits

Didn't find your answer?

I wonder if anyone can help me out on this please.

My friend is retired. He receives state pension and other self-employment income.  He is a higher rate tax payer.  He submitted his tax return for 2009/10 on line without any problem.

He received £6613 state pension for 2009/2010.

Last week, he received an SA-tax calculation from HMRC.  HMRC has changed his state pension to £8609 and also changed his basic rate band from £36440 to £38436.  HMRC's note said "Annual state pension (income box 7) has been changed to £8609 because this box should contain the amount of national insurance benefit you were entitled to received".  My friend has been retired 3 years.  HMRC has never adjusted his state pension in his tax return before.

I don't kind what this national insurance benefit is.  I would be grateful if anyone can explain it to me in a very simple term please.

Thank you.

Kim

Replies (5)

Please login or register to join the discussion.

Euan's picture
By Euan MacLennan
01st Mar 2011 11:54

Something similar

According to the Self Assessment Tax Returns Guide, Box 7 on the Tax Return is for "State Pension" - just state pension and nothing else - and Box 15 is for "Other taxable State Pensions and Benefits" -  which, according to the Guide, includes Widow's Pension or Bereavement Allowance, Widowed Parent's Allowance and Carer's Allowance amongst others.

We have a client of under 60 in receipt of a Widowed Parent's Allowance of £8,790, which we entered in Box 15.  The annual letter advising the rate looks very like the letter from the Pensions Service advising the rate of state pension for the new tax year; confusingly, it makes no mention that it is a Widowed Parent's Allowance and actually refers to it in the narrative as "state pension", but it comes from the Jobcentre, not the Pensions Service.

After we submitted our client's SA return, HMRC sent us a Tax Calculation saying that they had included £8,790 in Box 7 "because this box should contain the amount of National Insurance benefit you were entitled to receive", which is just plain wrong.  They had not moved the £8,790 from Box 15, so the amount was now duplicated and our client was being charged an extra £1,750 of tax (plus payments on account).  When I called the agent line, the call centre operative agreed immediately that it was duplicated and removed it, but I could not understand his explanation of how it happened - something about "code".  I think that the Revenue has picked up a feed from the Jobcentre of the amounts paid for these other taxable state benefits and the system has been programmed (perhaps, he was talking about program code) in error to put them into Box 7.

Is it possible that your friend receives £1,996 of one of these other taxable allowances/benefits or did he just understate his state pension?  A common mistake is to multiply the 4-weekly payment by 12, rather than 13, but this would not account for the entire increase.  Ask him to show you the letter the Pensions Service would have sent to him in February/March 2009 or even, the similar letter in 2010 - the rate would be only slightly higher.  If that does not explain things, get your friend to call the number shown on the tax calculation for an explanation.

Incidentally, it is not his basic rate tax band which has been increased - it is the amount being taxed at the basic rate which has increased by the £1,996 of the adjustment.

Thanks (0)
avatar
By Kim Woods
01st Mar 2011 17:27

State pension and national insurance benefits

 Thank you very much for your explanation - I will ask my friend to check his pension and phone HMRC.

Thanks (0)
avatar
By Kim Woods
01st Mar 2011 17:27

State pension and national insurance benefits

 Thank you very much for your explanation - I will ask my friend to check his pension and phone HMRC.

Thanks (0)
avatar
By Shirley Martin
03rd Mar 2011 19:33

Euan's case

Euan

I think that the answer to your own case lies in the PAYE manual section 130075.  This explains that the figure for Widowed Parent's Allowance is supposed to be held in the Taxable Social Security Payments, Other Benefits field on NPS.  However the section says that up to November 2009 the figure in this field was not flowing into the reconciliation or code and so instead staff were advised to put it in the State Pension field in NPS instead.

When the return was processed the system picked up the fact that NPS had a State Pension figure but box 7 was empty and hence the manual incorrect "correction".

Although the person you spoke to corrected the SA return, if they weren't aware of this manual section they might not have updated NPS and so you could get the same problem next year as some benefits get carried forward in NPS from to year.

If you have a copy of her coding notice for 10/11, look to see if this benefit is described as "Other taxable state benefits" (correct) or "State pension" (incorrect).  Likewise ask her to show you her 11/12 code when she gets it (as you won't be getting one this year).  If they say State Pension then you'll need to give them a call to get it changed.

If anything here is unclear then please yell.

Kind regards

Shirley

Thanks (0)
Euan's picture
By Euan MacLennan
03rd Mar 2011 22:59

@Shirley M

Thank you for the explanation.  I don't really understand the gobbledygook in PAYE130075, but I am sure you have hit the nail on the head.

I do hope that we don't get this mistake repeated on every other client with an "other" taxable state benefit.

Thanks (0)