What Is PGO Tax?

Tax rebates and pensions are the main sources of income for retired individuals. Through the discussion in this blog post, we aim to understand the concept and application of a PGO tax and what happens when someone needs to reclaim overpaid taxes. For a broader perspective of the topic, we will also explore how a tax rebate affects individuals, how tax rates are calculated and which incomes are gax free.

What Is PGO Tax?

PGO stands for Paymaster General’s Office which is responsible for managing the pensions of armed forces personnel and certain civil servants. Since these pensions are also taxable, there may be instances when certain individuals have overpaid their taxes on these pensions, In such a case, thw HMRC refunds the overpaid amount of tax which is termed as PGO Tax.  

Under ordinary circumstances, to reclaim overpaid taxes while withdrawing funds from their pension, claimants use the P55 introduced by HM Revenue and Customs for the tax year 2021-22. 

This form is only to be used if claimants:

  • do not have a P45
  • are not employed to work
  • are not claiming benefits

To access the P55 form online, claimants can use their Government Gateway user ID and password. If they don’t have one, they can register for the same.

The P55 form can be filled out online or by taking a printout and should be submitted to the HMRC by overtaxed individuals who fulfil the following conditions regarding a withdrawal from their pension pot: 

  • they have withdrawn a part of their pension
  • they will not be making regular withdrawals
  • their pension body has not made a refund

As a basic taxpayer, you would have been taxed at 40 per cent for making withdrawals from your pension. By filling in the P55, you are making a repayment claim to the HMRC to be repaid the excess tax deduction. If you fail to do so, you will have to wait until the end of the tax year for HMRC to pay back this amount. 

What Is A P60 Tax Refund?

A P60 is an annual certificate sent by HMRC to taxpayers. It contains details of their annual earnings and tax deduction. To claim a tax refund using the P60 form, claimants will need to share the following details with HMRC:

  • their earnings in total
  • the amount of income tax that they have paid
  • the amount of income tax that they have paid in excess

Additionally, they must also provide details of their National Insurance number and employer reference number.

In the case that a taxpayer has overpaid their tax due to any of the following reasons, 

  • being put on an emergency tax code due to starting a new job,
  • having two jobs simultaneously, or
  • switching from a full time to a part-time job

they can reclaim the amount from HMRC after the end of the tax year. Claims for overpaid taxes can be made for up to four years. This means that an overpaid tax in 2022 can be claimed until 2026.

Can I Get A Tax Rebate Through Wages?

Yes, if you have overpaid your tax paid through wages under the PAYE scheme, you can get a tax refund by contacting the HMRC. 

When you call HMRC about your tax refund due to overpayment, you must make sure that you have the following information available to you:

  • your personal details: including  your full name, address and date of birth
  • your National Insurance number
  • details of your employers or pension providers and their PAYE scheme reference number
  • Detailed estimates of your earnings and/or pensions from each source for the current tax year (with documentation)

Why Have I Overpaid My Taxes?

The reason(s) why salaried individuals may overpay their taxes through a PAYE scheme may be classified as follows:

  • They started a new job and were assigned an emergency tax code on a temporary basis
  • Their employer used an incorrect tax code
  • They held a job for a part of the year (and not the entire tax term)
  • They had more than one job at the same time
  • They are a student who only worked during holidays
  • Their “other incomes” have been reduced
  • They stopped working in the middle of the year and had no taxable income or benefits
  • Their circumstances changed; such as moving from full time to part-time work

In the case that a taxpayer has overpaid their tax due to any of the following reasons, 

  • being put on an emergency tax code due to starting a new job,
  • having two jobs simultaneously, or
  • switching from a full time to a part-time job

they can claim a tax refund and reclaim the amount from HMRC after the end of the tax year. Claims for overpaid taxes can be made up to four years. This means that an overpaid tax in 2022 can be claimed until 2026.

How Can I Claim A Tax Rebate?

To claim a tax refund, you will need to use the P60 form and share the following details with HMRC:

  • your earnings in total
  • the amount of income tax that you have paid
  • the amount of income tax that you have paid in excess

Additionally, you must also provide details of your National Insurance number and employer reference number.

In the case that a taxpayer has overpaid their tax due to any of the following reasons, 

  • being put on an emergency tax code due to starting a new job,
  • having two jobs simultaneously, or
  • switching from a full time to a part-time job

they can reclaim the amount from HMRC after the end of the tax year. Claims for overpaid taxes can be made for up to four years. This means that an overpaid tax in 2022 can be claimed until 2026.

How Are Tax Codes Calculated?

Tax codes are a combination of letters and numbers that determine the amount of income tax due on an individual. While the letters indicate your financial position and how it relates to your personal allowance, the numbers tell your employer or pension provider the amount of tax-free income that you are eligible for in that tax year. 

The following steps are followed by the authorities while assigning tax codes:

  • Step 1: Your tax allowances are calculated. In most cases, this is an individual’s personal allowance added to any other allowances and job expenses.
  • Step 2: Your deductions are calculated. These are incomes for which tax has not been paid and may include any part-time work or certain state benefits.
  • Step 3: The deductions are subtracted from the tax allowances. The result is your pre-tax income. If this amount equals personal allowance, your income remains tax-free.

Which Incomes Are Tax-Free?

Incomes derived from any of the following sources are considered to be tax-free in the UK:

  • Transport costs of an employee’s (and their immediate family) relocation for work in the UK
  • Winnings from games, pool betting, lotteries or competitions with prizes
  • Long service employee awards (certain limitations apply)
  • Individual savings account amounting to £20,000
  • Incomes such as interest or dividends arising from savings accounts 
  • Pensions paid to war widows and dependents
  • Social security and state benefits include maternity allowance, employment and support allowance, attendance allowance, child tax credit and housing benefit. 

How Much Income Tax Do I Have To Pay?

Incomes above the minimum cap are taxed at an incremental rate of 20 per cent to 45 per cent depending on whether an individual belongs to the basic, higher or additional tax rate band. Below are details of these bands:

  • 0 per cent income tax when income is up to £12,570
  • 20 per cent income tax when income is between £12,571 and £50,270 
  • 40 per cent income tax when income is between £50,271 and £150,000 
  • 45 per cent income tax when income is above £150,001

If you are self-employed, you are required to file a self-employed tax return to pay your taxes through a self-assessment. 

Does A Tax Rebate Affect Universal Credit?

Yes, a tax rebate affects Universal Credit as it counts as income when a means test is carried out for benefits claims such as Universal Credit. However, the recipient is not required to pay income tax on a tax rebate.

The reason for this lies in the fact that  when a means test is carried out for benefits claim, the following types of income are taken into account for benefits claim and that too for income-based benefits:

  • Cash
  • Stocks and shares
  • Savings
  • Assets
  • Investments (rent, dividend, interest)
  • Unearned income (pension payments, student income)

Capital valued between £6001 and £16,000 will affect your Universal Credit claim (if you have capital beyond this amount you will no longer be eligible for Universal Credit).

Conclusion:

The explanation in this blog post makes it clear that PGO Tax indicates the pensions of armed forces personnel and certain civil servants. Since these pensions are also taxable, there may be instances when certain individuals have overpaid their taxes on these pensions, In such a case, the HMRC refunds the overpaid amount of tax which is termed as PGO Tax.  

FAQs: What Is PGO Tax?

Do I pay tax on my army pension in the UK?

Yes, you will be required to pay tax on your army pension in the UK. However, you will not be required to make national insurance contributions from this amount.

Can my wife get my military retirement if we divorce?

Yes, your wife can claim your military retirement pension if you divorce. Since there is no time limit set on the duration of your marriage, she may still claim access even if you were married for less than a year.

Do you have to report a tax rebate to Universal Credit?

Yes, it is the claimants’ responsibility to declare a tax rebate as it counts as additional income during the period. If the DWP finds out that income-related information was deliberately hidden by a claimant, they can not not only ask you to refund the excess amount but also sanction your future payments due to benefits fraud.

How long does it take for HMRC to refund overpaid tax?

In the case of tax refunds on savings and investments, it may take at least 5 weeks for your tax refund process once you have filed an R40 form. From there on it takes then another 5 days for the amount to be transferred to your bank account once your claim is authorised by HMRC. 

Can I track my tax refund online?

Yes, you can track your tax refund online through the gov.uk.website. However, this is only possible if you have claimed your overpaid tax online as well.

References:

Groups.google.com

What does PGO tax mean on the bank statements? – Greedhead.net

I have just received PGO tax money what does that mean

How do I claim back tax I have overpaid through PAYE on wages or pensions? | Low Incomes Tax Reform Group

Claim a tax refund – GOV.UK

P60 tax refund examples – what do you need to know?

Discussion: Tax Credit Overpayment – Rightsnet

What Is A P60?.