Pension Tax Question

swine

Hi.
Dont know if this is the place for advise or explanation. I took early retirement some years ago, got a health service pension. I contiued to work upto 6 months ago when I got sick of paying Tax at BR. I am 62 have 44 years stamps on and a full old age pension to come at 65. Question!!!!! My health service pension is taxed at the present 10% and is my sole and only income. Will I have to pay 20% on this pension next April???????
Best Regards, swine.

dunstonh

any earnings over the personal allowance will be taxed at 20%.

CLAPTON

what exactly do you mean that your are taxed at 10%? what is your tax code?

jem16

CLAPTON wrote: »

what exactly do you mean that your are taxed at 10%? what is your tax code?

The OP means that at present he/she is only in the 10% tax bracket - i.e. the first £2000 approx above the personal allowance. Once the tax changes recently announced in the budget come into force there will no longer be a 10% tax bracket.

EdInvestor

Here are the current rates and bands:

http://www.hmrc.gov.uk/rates/it.htm

The 10% band will be abolished next year and the BR band will reduce to 20%. Personal allowances will rise by inflation

BUT

Age allowances will rise by a lot more than inflation to around the 10k level by the time you reach 65, so the position should be much better.

moonrakerz

EdInvestor wrote: »

The 10% band will be abolished next year

I think a better way of putting that is: "the 10% band is being increased to 20%". !!

jamesd

It's too soon to say because the tax allowances for 2008/9 haven't been announced yet, though something around 5400 is likely. Anything above that would be taxed at 20%. If you haven't checked benefit possibilities you might want to do so for that year, when it looks as though you'll see some reduction in after tax income that might make you eligible.

Once you're 65 you should do considerably better because of both the state pensions and the age allowance, which is expected to rise to around 10,000 before you pay any tax at all.

swine

Sorry for the delay in reply. My Tax code is the same as a single person. I have been paying BR on my earnings upto six months ago when I stopped working. I only pay a few pounds a month on my health service pension but it does fall into the £2000 after personal allowance which at the moment is 10%. so in fact my tax will double if the personal allowances remain the same.
jamesd seems to have the answer