How your State Pension affects the tax deducted from your local government pension

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Your State Pension will count as income for tax purposes, but it will be paid to you without any tax being deducted.
 
If your total income, including your State Pension, is below your Personal Allowance (2022/2023 £12,570) then you will not pay any income tax.
 
However, if your total annual income, including your State Pension, is above your Personal Allowance, you will have some tax deducted from your local government pension.
 

When you retire and first receive your local government pension

 

If you have not reached your State pension age by 5 April

Merseyside Pension Fund will use the same tax code as when you were employed, using the pay and tax details supplied on your P45 from your former employer. We then forward the P45 to HMRC.

 

If you have reached your State pension age by 5 April

We will use a special BR tax code, meaning that every pound of your pension will be taxed. This is to prevent you paying too little tax, as it is likely that the tax code eventually issued by HMRC will probably be much lower than the one used whilst you were employed. One reason for this is that the code is adjusted to take account of the amount of State pension that you receive.
 
HMRC may take some time to sort out what tax you should pay but as soon as they do, they will write and tell you. They will also send the same details to us, so if you have paid too much or too little tax, we can normally put this right through your pension.
 
If this isn’t resolved by the end of the tax year (5 April), you will need to contact HMRC:
 
HM Revenue and Customs
Pay As You Earn and Self Assessment
BX9 1AS
United Kingdom
 
Telephone: 0300 200 3300 (From overseas please dial: +44 135 535 9022).
Textphone: 0300 200 3319 (for hearing and speech impaired members)
Tax Reference: 428/M1 (please quote this as well as your National Insurance number in all cases)