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June Questions and Answers

Newsletter issue – June 2026

Q: I retired last year but have since taken on a part-time job. My defined benefit pension uses up my Personal Allowance, so how much tax will I have to pay?

A: As you state the full £12,570 Personal Allowance has been consumed, all your earnings for your part-time job will be taxable at your marginal rate. This is most likely to be 20% for you, if your total annual income remains below £50,270.

If you are paid through a PAYE scheme, your employer will get a tax code from HMRC, reflecting your Personal Allowance has been used up, and deduct the tax automatically.

You should be aware that if you are also in receipt of the state pension, it could complicate your tax position. Whilst taxable, the state pension is paid with no tax deducted. But HMRC will collect any tax due via the tax code on other sources of income - in your case, your part-time job. This can result in more tax being taken via PAYE than you might be expecting.

Please get in touch to discuss ways of reducing your tax exposure under these circumstances.

Q: Looking at my paperwork for the last tax year, I think I may have overpaid tax. What do I need to do to correct this with HMRC?

A: HMRC usually notifies you if you've paid too much (or too little) tax by the end of the tax year. It typically sends a P800 tax calculation letter, or a Simple Assessment letter. These letters explain whether you owe tax or are due a refund and get sent out starting in June of the subsequent tax year. You'll only get a letter if you're employed or receiving a pension. Self-Assessment taxpayers won't receive a P800 or Simple Assessment — their bill adjusts automatically.

Reasons you might get a P800:

Incorrect tax code (e.g., HMRC had outdated income info)

You changed jobs and were paid by two employers in the same month

You started receiving a workplace pension

You received ESA or Jobseeker's Allowance

Reasons you might get a Simple Assessment:

You owe tax that can't be taken automatically from your income

You owe more than £3,000

You need to pay tax on your State Pension

If you don't receive a letter and still think you've overpaid tax, you can request a refund online via GOV.UK using your Government Gateway ID, access the HMRC app using the "claim a refund" option, or by post using a P800 or relevant form.

Q: I am close to reaching the age where I can take my private pension but have no plans to retire yet. Are there tax benefits if I defer my pension until I do?

A: Yes. Judging by what you have said, you have not started to take any of your pension, whether it be the tax-free lump sum available at age 55 or a regular drawdown of income. If that is the case, you can continue to contribute up to £60k per tax year to your pension. This attracts tax relief.

If you had taken any of your pension as income, you would have triggered the Money Purchase Annual Allowance (MPAA), which is the limit on the amount you can contribute to your defined contribution pension. The limit drops from £60k to £10k, greatly reducing the maximum potential tax relief available. Also, unlike the Standard Annual Allowance of £60k, you cannot carry forward any unused MPAA from previous years.