New State Pension Guide

loiner

Ah, thanks for the clarification. It's paid as a lump sum, but I mustn't call it a lump sum ��

Can anybody clarify the tax situation regarding the backdated payment? I assumed I'd be liable for tax in the tax year the payment was made, but I was told the liability is in the previous tax year. I couldn't see the logic in this.

colsten

loiner wrote: »

Can anybody clarify the tax situation regarding the backdated payment? I assumed I'd be liable for tax in the tax year the payment was made, but I was told the liability is in the previous tax year. I couldn't see the logic in this.

I would agree, the payment should be taxable in the year it was actually made. Who told you otherwise? Have you asked the HMRC?

Dazed_and_confused

I disagree, the backdated State Pension payment would be taxable in the year it relates to not when it is actually paid.

LITRG, normally a very reliable source, explain it here,

https://www.litrg.org.uk/tax-guides/pensioners/what-tax-do-i-pay-my-state-pension-lump-sum

loiner

colsten wrote: »

I would agree, the payment should be taxable in the year it was actually made. Who told you otherwise? Have you asked the HMRC?

It was the Government Pension Service. Think I might call them again and get a second opinion.

loiner

Dazed_and_confused wrote: »

I disagree, the backdated State Pension payment would be taxable in the year it relates to not when it is actually paid.

LITRG, normally a very reliable source, explain it here,

https://www.litrg.org.uk/tax-guides/pensioners/what-tax-do-i-pay-my-state-pension-lump-sum

That seems perfectly logical. I want my back dated payment to be paid (and taxed) in the current tax year. It appears my only option is to continue to defer my pension until 6 April next year, then claim payment of both pension and 12 months back dated pension.

Walkingwildlife

I thought it was 35 years of NI payments that guaranteed your state pension. I just logged into the gateway and it states I have 39 full years of NI payments which gives me £155 a week and I need another three years to get the full £168.
Have things changed or am I missing something?

Dazed_and_confused

You are missing the fact that the new State Pension rules only apply in full to those starting out towards State Pension from April 2016.

You and most of the rest of the population are under transitional rules which mean you could get to the maximum with less than 35 years or equally could need more than 35 years.

Each year you add will increase your State Pension by £4.81/week until the maximum is reached.

If you working/self employed and will be adding years naturally nothing to worry about but if you are going to be paying voluntary payments you need to be careful about the final year.

If you got to say £167.80 then adding another year won't add £4.81 it will only add £0.80 to get you to the standard maximum of £168.60.

So that last year isn't always as good value for money if you are paying voluntary Class 3 NI.

Straightbat

loiner wrote: »

That seems perfectly logical. I want my back dated payment to be paid (and taxed) in the current tax year. It appears my only option is to continue to defer my pension until 6 April next year, then claim payment of both pension and 12 months back dated pension.

Hi Loiner I'm not following you. If you want the "backdated payment" to be paid and taxed in the current tax year, why would you wait until April? If you claim it now, it will be paid and taxed in the current tax year. Or are you referring to backdating that would go back into the 18/19 tax year? Even so, you do not have to backdate a whole year. You could claim now and only backdate to April 6th (or is it the 5th). Your backdated and current claim could then be earning interest between now and next April.

Straightbat

I have deferred my state pension but was shocked to read that back payments are taxed in the year when they would have been due, not necessarily therefore in the tax year when they are actually received. However, I assume that for means testing (e.g. of parental income for a student's maintenance loan) the backdated sum is declared, unlike for taxation, for the year when it is actually received - no guidance notes that go with the form suggest otherwise, and as it is a means test it would be illogical not to have to declare income received just because it was taxable in a previous means test assessment period.

Dazed_and_confused

I have deferred my state pension but was shocked to read that back payments are taxed in the year when they would have been due, not necessarily therefore in the tax year when they are actually received.

They aren't taxed in the year they relate to, they are taxed in the year paid. Where have you read that they are taxed in the year they relate to?

Are you getting confused between deferrment and backdating?

Maybe it would help if you made it clear exactly what you have done and, crucially, when you reached State Pension age. Quite an important fact for deferment.