State Pension

bristol_pilot

My Mother has been asked to fill in a "short" tax return. Her income is state pension (which is paid gross, I think), private pension and investment income. She is a basic rate tax-payer.

Because her state pension is paid every 4 weeks, the total she actually received in state pension during the tax year does not exactly match the pension to which she was entitled for the tax year. Which of the two amounts should be entered on the tax form? Logically I feel it should be the actual amount received, but I think I read somewhere that the pension entitlement should be entered instead.

Grateful for any insight.

reddevilled

Use the amount that she received in the year.

schiff

reddevil - don't agree, sorry!

I am ex-Revenue and, in spite of being one of the flock, fell into this exact situation when I started my NRP. It is advantageous because the pension is paid in arrears to have amounts actually received assessed. But the pension 'for the year' is the figure correctly chargeable to tax.

It might be useful at this juncture to mention that having the NIRP paid out weekly (by simple request) means extra bank interest if you have it paid into a current account paying interest (particularly if, say, it's with A&L at 5% gross, 4% net). Just a thought.

reddevilled

schiff wrote:

reddevil - don't agree, sorry!

I am ex-Revenue and, in spite of being one of the flock, fell into this exact situation when I started my NRP. It is advantageous because the pension is paid in arrears to have amounts actually received assessed. But the pension 'for the year' is the figure correctly chargeable to tax.

It might be useful at this juncture to mention that having the NIRP paid out weekly (by simple request) means extra bank interest if you have it paid into a current account paying interest (particularly if, say, it's with A&L at 5% gross, 4% net). Just a thought.

You are quite right.

Sorry, I was in a hurry to get back and watch the football. State pensions are taxed on an accruals basis ie what you are due for the year in question.

In likliehood the difference between what you are due and what you are receive in any given year are going to be minimal, and as long as you follow the same treatment each year then there shouldn't be a problem.