'OT' Tax Code

JodieR

Client is non-resident but recieving a UK pension and they're using tax code 'OT'. I've done a bit of digging and it seems to be applied if the pensioner didn't complete P46(PEN), but I can't make sense of the amount of tax that's being deducted - he says that he's currently receiving £834.22 gross, £88.40 tax and £745.82 net. Does anyone know how the £88.40 has been calculated and if completeing form P46(PEN) will sort this problem out now, or do we have to contact HMRC to arrange for the code to be amended?

payrollpro

JodieR,

I think you will find that the 0T is probably right in these circumstances but you are also right the calculation makes no sense. 0T usually operates on a W1/M1 basis so £834 a month would attract 20% tax and hence £166. 80. On a weekly basis it would be partly 20% (£673) and the rest 40% and that comes to £199 income tax.

This is closer to a 10% tax rate which only applies to savings for very low income taxpayers so I think you need to do a lot more digging. Completing a P46(PEN) probably won't make too much difference because the real question is whether the person has any right to the personal allowance and that's a gamble for non residents. If they are then the 0T is completely wrong but if they are to be denied the PA then 0T is spot on.

Payrollpro

Pete12

Payrollpro,

I was under the earlier impression that - in my own case - a former British citizen, who had emigrated to Australia and currently holds both British and Australian citizenship (2 passports) was not allowed a personal allowance (a practising CTA told me this). Subsequently, I was informed the fact that the person does hold British citizenship entitles them to a personal allowance which can be applied to investment income generated in the UK...I'd welcome your opinion on this.

Pete12

Monsoon

As I understand, it, if you are a Britsh Citizen you get a personal allowance. I am not aware of any exceptions to this, though could always be wrong.

JodieR

Thanks very much everyone - that's very useful!