Pensions and tax

patel1098

Hi
I'm hoping you can help. My mother is due to retire soon and is a bit confused as to how her pension will be taxed, I'm a bit clueless so hoping someone could help.
She knows her state pension will be £143.35 and she has a private work pension which will pay £9000 per year.
Will both pensions be taxed, or just the private one as the state pension is under the personal allowance?
Thanks so much!

GunJack

You're right, the personal allowance is compared to the State pension, and if there's any allowance left over it's applied to the private pension.

xylophone

Will both pensions be taxed, or just the private one as the state pension is under the personal allowance?

Regardless of whether or not the state pension is under or over the personal allowance, it is always paid gross.

However, HMRC will be aware of the state pension and the private pension.

Let's suppose her only income is the two pensions - approx £16,500.

In the tax year 2019-20, the standard PA will be £12,500, meaning that your mother would owe tax on £4000 ( £800 per annum).

HMRC will issue a code to the private pension payer to ensure that this is paid from the private pension.

https://www.gov.uk/tax-on-pension/how-your-tax-is-paid

Re savings income

https://www.moneyadviceservice.org.uk/en/articles/your-tax-rate

patel1098

that's really helpful thank you!