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HMRC internal manual

PAYE Manual

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PAYE service income, allowances, benefits and deductions: IABD: amendments and updates to state pension

Please note that the following guidance only relates to state pensions.

To enter or update widowed parent’s allowance or bereavement allowance you should continue to follow the guidance at Action guide tax40161

Care should always be taken when entering or updating state pension details in IABD. In your day to day work there will be times when state pension is being introduced into the tax code in a later tax year than it commenced, or you need to update state pension details already on the record. It is important that state pension details are always entered correctly to

  • Ensure that the tax code is correct
  • Ensure that annual coding calculates the correct amount of state pension for CY+1
  • Ensure that the end of year reconciliation includes the correct amount of state pension

State pension commences CY

Where you are updating IABD for the first time with state pension details you should follow the guidance in Action guide tax40160.

Revision to CY first year state pension information

Where you are notified within the first year of state pension commencing of a change to the state pension details held in IABD, you must amend IABD as follows

  • Amend the start date if necessary

Note: If you have received information that suggests the original state pension start date is incorrect and the actual state pension start date is earlier than CY (06/04/CY), you should follow the guidance below under ‘State pension commences earlier than CY’.

  • Enter the revised weekly amount
  • Select ‘weekly’ as the frequency of payment, ensuring that the frequency of payment is not recorded as ‘annually’
  • Select ‘estimated’ or ‘actual’ as appropriate

The 52 weekly amount should be automatically calculated for CY+1 and populated in IABD, where this hasn’t occurred you should enter the 52 weekly amount in IABD for CY+1.

Two different rates of state pension received within the same tax year

It is possible that two different rates of state pension may be received in the same tax year, for example, due to the death of a spouse. To ensure that both the tax code and reconciliation are correct, you should follow the guidance under ‘Exceptional circumstances’ in action guide tax40160 when updating IABD.

State pension commences earlier than CY

State pension commences CY-1

Update IABD for the year state pension commences as follows

  • Enter a start date

Note: Not entering a start date will result in state pension being incorrectly calculated in CY.

  • Manually calculate and enter the ‘actual’ state pension received for the first year
  • Select ‘annually’ as the frequency of payment
  • Select ‘estimated’ as the state pension information is not from a P46(DWP)
  • For each of the following tax years enter 52 weeks of state pension as ‘annually’

Note: Where the DWP run has already taken place for CY+1, any updates for CY+1 state pension should include the P242 updates.

  • Record the state pension start date in Contact History

Note: You should not issue P173 or P46(DWP) slips for state pension cases. P173 or P46(DWP) slips should be only issued to include Widowed Parent’s Allowance (WPA) or Bereavement Allowance (B Allce) cases in the DWP Uprating Service.

State pension commences CY-2 or earlier

Update IABD for the year state pension commences as follows

  • Do not enter a start date

Note: Entering a start date will result in state pension calculation problems at annual coding.

  • Manually calculate and enter the ‘actual’ state pension received for the first year
  • Select ‘annually’ as the frequency of payment
  • Select ‘estimated’ as the state pension information is not from a P46(DWP)
  • For each of the following tax years enter 52 weeks of state pension as ‘annually’

Note: Where the DWP run has already taken place for CY+1, any updates for CY+1 state pension should include the P242 updates.

  • Record the state pension start date in Contact History

Note: You should not issue P173 or P46(DWP) slips for state pension cases. P173 or P46(DWP) slips should only be issued to include Widowed Parent’s Allowance (WPA) or Bereavement Allowance (B Allce) cases in the DWP Uprating Service.

End of year reconciliations

In first year state pension cases, once the information has been submitted and you return to the ‘Pension Details’ screen from the IABD Landing or Summary screen it will display the ‘actual’ amount of state pension calculated for the year. This ‘actual’ amount of state pension will be the amount used by the end of year reconciliation process.

Note: It is important that IABD is always updated correctly to ensure that the end of year reconciliation includes the correct state pension figure for the year.