My pension is £8,500 a year – my tax code makes it £124,482

L.F. writes: Each April since I retired, I have had a problem with my Pay As You Earn tax code. For unknown reasons Revenue & Customs assumes my income has gone up by more than £110,000 a year, which is ridiculous. In 2017, I appealed and the code was changed before the tax year started. However, this year, when I received my first pension payment, 50 per cent was deducted in tax.

YOU must be wondering what will happen next April, when the new tax year starts. Your actual pension is about £8,500 a year, but in 2017 your tax code showed it as more than £116,000 and this year it was magically transformed into £124,482. You managed to nip this nonsense in the bud in 2017, but last April more than £200 was collected in tax unnecessarily, so I asked Revenue & Customs to explain.

For once, this was not a case of the tax man programming a computer incorrectly, or of one tax office not speaking to another.

A Revenue official told me: ‘We understand that this has been frustrating for Mr F and have made sure it won’t happen again. The error happened because information from the employer was not accurate, which meant the wrong tax code was applied.’ This has been corrected and your latest pension payment not only showed no tax deduction, but it included a refund of tax you already paid. Good.