Tax, age allowance for War Widow's Pension, Attendance allowance

jamesd

I'm doing some tax and investment planning for a relative and want to make sure that I properly understand their tax situation. Please let me know if my understanding of the tax and age allowance effects of these pensions and allowances is right or wrong:

War Widow's pension: tax free, doesn't count for age allowance reduction?
Attendance allowance: tax free, doesn't count for age allowance redution?
State pension: taxable, counts for age allowance reduction.
Navy pension: taxable, counts for age allowance reduction.
Local authority pension: taxable, counts for age allowance reduction.

Thanks, particularly for any corrections!

margaretclare

Attendance Allowance is not taxable and not means-testable. Not sure what you mean by age allowance reduction?

State pension is taxable.

Margaret

jamesd

Thanks. By age allowance I meant the extra personal allowance of 7,550 instead of 5,225 that you get from age 65, or 7,690 from 75. This is reduced if the income is above 20,900 for 2007/8 and that would affect this person if all of their income counted. It would cause them to pay an effective rate tax rate of 33% on any taxable savings and make it even more important that they use their ISA allowance to avoid this.

Hoddie_2

HMRC helpsheet IR310 will help you decide whether the navy pension you're checking is taxable or not. If it is, it counts when calculating the age-related allowances, if not then it doesn't.

The rest is correct.

margaretclare

jamesd wrote: »

Thanks. By age allowance I meant the extra personal allowance of 7,550 instead of 5,225 that you get from age 65, or 7,690 from 75. This is reduced if the income is above 20,900 for 2007/8 and that would affect this person if all of their income counted. It would cause them to pay an effective rate tax rate of 33% on any taxable savings and make it even more important that they use their ISA allowance to avoid this.

Thanks for the explanation. We get our incomes separately as 2 individuals and although our total income is above the £20,900 you mention, because we're taxed as individuals it doesn't affect us. So in fact we both get the £7550 personal allowance, plus half of the married people's allowance (half each, split between us).

It would be completely different if we were on a means-tested benefit like pension credit, where all income (except for AA) is lumped together.

I agree with you about using ISA allowance to the full.

Margaret