If your income is, say, a private/occupational pension plus state pension then you pay tax on a PAYE basis. The state pension for 99% of people is covered by the annual tax allowance, currently £12,570 any unused element of that allowance then gets transposed into a tax code for your pension provider. For example, say your state pension is £10,000 - you have £2,570 available allowance to set off against any private pension, If that pension is £10,570 pa you take off the £2,570 allowance and tax is calculated on £8,000 ie 20% = £1,600 deducted, you receive £6,400 or £ 533.33 pm
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