Tax codes for small occupational pensions


HMRC requires PAYE procedures to be followed in all circumstances

Prior to April 2005, new pensions above and below the PAYE threshold were treated differently if the pensioner didn't provide a P45. The distinction was withdrawn in April 2005 and, if a pensioner does not provide a P45, the pension payer must operate special P46 procedures in order to allocate the correct tax code. An employer paying a pension to a former employee must use form P160. Employers and pension payers may alternatively use the PENNOT, the electronic equivalent of forms P46 and P160. The current procedures are set out on pages 21 and 22 of booklet CWG2 Employer Further Guide to PAYE and NICS.

HMRC is aware that some employers and pension payers have not adopted the revised procedures and are continuing to follow procedures agreed with their tax office if a pension does not exceed the PAYE threshold. From April 2007, HMRC requires that all such local agreements cease and the correct procedures be applied to all new pensions from that date. Employers and pension payers are likely to be asked to provide lists of existing pensioners for whom PAYE is not currently operated as, in many case, tax code NT is being used under a local agreement and HMRC is not aware of their existence.

Queries on this subject should be addressed to the employer's or pension payer's tax office, not to APSS. APSS only deals with matters relating to the administration (including any technical issues) of Pension Schemes and where tax is due from the scheme.

...UK Payroll News - Latest

Further information:
Small Occupational Pensions

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