Basic question for a friend

buel10

Hi all.
A very basic question for you all - my friend is due to retire next year. He already draws a small pension from his last employer. He wanted me to check that when he retires, is he correct in thinking that the £9,000 state pension he will receive will mean that he will only be able to earn £2000 before he is taxed on his income?

robin61

Yes the personal allowance is £11k in 2016 / 17. So income above that is taxable.

warwicktiger

Yes, as above, depending on how small the current old employers pension is there may be little or no tax free allowance left.

xylophone

If he is earning and receiving a pension, has he checked that he is paying enough tax in the current year?

Re 2017-18 see

http://www.thisismoney.co.uk/money/news/article-3494974/Budget-2016-Osborne-raises-personal-allowance-cuts-40p-tax-threshold.html

"Delivering another jump in the personal allowance, George Osborne said that from 6 April 2017, the start of the 2017/18 tax year, individuals will be able to earn £11,500 before they start to pay tax."

buel10

Thank you for that.
A further question: my friend will soon also have a private pension that will pay him more than the remaining £2000, he'll be taxed on that income too?

LXdaddy

buel10 wrote: »

Thank you for that.
A further question: my friend will soon also have a private pension that will pay him more than the remaining £2000, he'll be taxed on that income too?

Yes.


Why would you think that he would not be subject to tax.


Income from pensions (like income from employment) is subject to tax. If your income exceeds your allowances you have to mpay tax.

robin61

He will have to pay tax on any income over £11k. So if had for example 8k state pension and £4k from a private pension he would pay tax on £1k at 20% which is £200.

xylophone

It appears that the OP's friend is not currently drawing a state pension.

It seems that he is employed and drawing a salary (?) and is also in receipt of a pension.

It also seems that he is about to receive another small pension in this tax year.

The OP should check that he is paying enough tax in this tax year - he may need to contact HMRC.

If he is entitled to only the standard personal allowance for 2016-17, then any pension/employment income over £11,000 is taxable.

http://www.uktaxcalculators.co.uk/