Why are taxes sometimes due at end of year for individuals with multiple pensions or employment incomes?
Pension and employment incomes are taxed separately via PAYE. As a result, the individual's full personal allowance will be applied to each income source. a At the very end of the planning year a final tax assessment is performed by the software and tax expenses are then trued up with the calculation across all incomes. Any taxes remaining will be paid in the following year of the plan. This can be seen on the Expenses and Taxes tab of the charts, Detailed Info panel.
In practice, each employer or pension provider would usually have a coding statement from the HMRC, which would provide the amount of personal allowance in coordination with other sources of income. However, for sake of simplicity, the software does not model coding statements.
For example, Carol earns approximately £24,575 from her pensions in 2015. During the year she pays in taxes, via PAYE, £318 on the income from her NHS final salary pension and £939 on her Royal Mail pension. These PAYE taxes can be seen on the Expenses tab of the Let's See chart Detailed Info panel. Her total income tax calculated at end of year is £3,092 leaving the remainder of £1,823 to be paid in the following year of the plan. This calculation is shown as a worksheet on the Taxes tab of the chart panel. Click the next bar/year of the chart for 2016 and viewing the chart details you will find a line item on the Expenses tab, "Taxes for Year 2015 - £1,823"