State pension and tax

kuepper

yangptangkipperbang wrote: »

Why anyone would want to call this a "scam" escapes me !

It is a scam because throughout your working life you're never told it's going to be taxed, then just before you retire you find out otherwise. I'm obviously not the only one who thinks it unfair http://www.dailymail.co.uk/news/article-2111889/Tax-state-pensions-axed-leaving-retired-middle-class-people-better-1-000-year.html

As for the issue I'd raised I found it explained here http://www.litrg.org.uk/pensioners/life-events/coming-up-retirement/tax-code-retire - see the example in the green text

seven-day-weekend

kuepper wrote: »

It is a scam because throughout your working life you're never told it's going to be taxed, then just before you retire you find out otherwise. I'm obviously not the only one who thinks it unfair http://www.dailymail.co.uk/news/article-2111889/Tax-state-pensions-axed-leaving-retired-middle-class-people-better-1-000-year.html

As for the issue I'd raised I found it explained here http://www.litrg.org.uk/pensioners/life-events/coming-up-retirement/tax-code-retire - see the example in the green text

It's a source of income. If you have enough income then it is taxed. I fail to see why that should be considered a scam, nor why you think it is not taxable. It;s not a secret: http://www.hmrc.gov.uk/pensioners/pension-statepension.htm#1

I don't pay tax on mine, but that is because I don't have enough income.

Pollycat

kuepper wrote: »

It is a scam because throughout your working life you're never told it's going to be taxed, then just before you retire you find out otherwise. I'm obviously not the only one who thinks it unfair http://www.dailymail.co.uk/news/article-2111889/Tax-state-pensions-axed-leaving-retired-middle-class-people-better-1-000-year.html

I think you need to check what the definition of 'scam' is.

The Daily Mail article refers to taxing of state pensions as 'unfair'.
'unfair' is not the same as 'scam'.

solihullrose

patanne wrote: »

I think the problem is MargaretClare that the large majority of people never do have to deal with the taxman until they retire, it is all done by their employers on their behalf. I used to do wages for many years so I have some idea of the 'ropes' but personally I have only actually dealt with them when I had a benefit in kind & when the benefit in kind stopped (and back in the day when a woman got married & she became a separate person with 2 personal allowances in the same year). Now I am retired I have to file self assessment. To anyone without any prior knowledge or previous experience it must feel overwhelming.

I have just retired and been told that although I had thought that my tax was being dealt with properly between my employer and the tax office it had been underpaid. I was told that I should have always been checking it so it was my fault that I now owe about £2,500 in tax under paid over the last few years.
I am not complaining about paying tax but just thoughht that I should point out that just leaving it to your employer can leave you with a big bill.

JezR

That Daily Mail report is well out of date. The final report of that committee has been out for some time and the changes it recommended were fairly minor.

In particular it rejected bringing state pensions into PAYE under cost grounds (although recognising it would have been better if they had always been done that way).

It did recommend yearly P60 equivalents from the DWP so everyone would know what their taxable pension income had been (not always clear to people because of the four-weekly payment system and that the Christmas bonus and winter fuel payments are non-taxable).

Other recommendations were replacement of the residual married couple allowance with a flat rate, elimination of the 10% savings rate (compensated by a higher ISA allowance), improvements to coding notices, and allow K codes recover tax through PAYE when this exceeds 50%.

Still would not help those who only have state pensions that are higher than the personal allowance.

Full report: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/198500/ots_final_review_pensioner_taxation_230113.pdf

margaretclare

solihullrose wrote: »

I have just retired and been told that although I had thought that my tax was being dealt with properly between my employer and the tax office it had been underpaid. I was told that I should have always been checking it so it was my fault that I now owe about £2,500 in tax under paid over the last few years.
I am not complaining about paying tax but just thought that I should point out that just leaving it to your employer can leave you with a big bill.

I've always thought that it was down to the individual to keep an eye on what goes in and what is taken out of their pay-packet. No one told me that. I've always thought so, but I do remember people who said 'oh, I don't understand my pay-slip', did not look to see whether they'd been paid correctly or what the deductions were. I even heard of one woman who didn't know that the wages clerk where she worked had incorrectly assumed that, following marriage, she wanted to pay the 'married women's reduced option'. She hadn't wanted to do so, was never asked, but equally, if she'd looked at her pay-slip she would have been aware that the amount of NI being deducted was too small and asked 'why?' Years, decades later, she discovered the disastrous effects. The wages clerk was at fault but so was she.

margaretclare

Pollycat wrote: »

I think you need to check what the definition of 'scam' is.

The Daily Mail article refers to taxing of state pensions as 'unfair'.
'unfair' is not the same as 'scam'.

If you only get state pension then it falls below the personal allowance level so doesn't get taxed. If you have other sources of income - works pension, annuities, private pensions, whatever, then the whole amount is added together and it is taxable. Can't see why that is a 'scam'. You pay tax on income. SRP is income. If you have other pensions then the total becomes taxable. Why is that hard to understand, or why need it be a source of indignation?

le_loup

margaretclare wrote: »

Why is that hard to understand, or why need it be a source of indignation?

Because he's a Daily Mail reader. They are indignant of everything. But, in fairness, the whole world IS out to get them.

kuepper

Amazing how you get bullied here because you 're ignorant of the system and asking for advice. Apologies for not being better informed and educated and never having met any pensioners who've earned enough to pay tax, so awareness of a pensioner paying tax was outside my life experience.

dunstonh

kuepper wrote: »

Amazing how you get bullied here because you 're ignorant of the system and asking for advice. Apologies for not being better informed and educated and never having met any pensioners who've earned enough to pay tax, so awareness of a pensioner paying tax was outside my life experience.

You often find responses follow the tone you set in your comments. You admit you dont understand taxation. That is understandable and you wont get criticised for that. However, the minute you start accusing perfectly legitimate things as scams, you start to lose sympathy from those trying to help you. Paying tax on your income is not a scam. It is a fact of life.