Defered State Pension - tax liability on lump sum

Dawn7765

My husband has been deferring his State Pension for the last 11 years.  This tax year (22/23) he will earn less than the £12,500 threshold.  Can anyone please tell me does that mean he will pay no tax on the lump sum if he claims it now as his tax for the coming year will be zero.  Thank you.

Dazed_and_C0nfused

Are you 100% certain his income will be less than his Personal Allowance?

You have to include all taxable income when calculating this, State Pension (from when he starts taking it assuming he doesn't backdate it a year), interest (ignore interest from ISA's), dividends, other pension income, wages etc.

Linton

The lump sum from a defered SP is taxed at your current rate, ie the rate at which you would be taxed without the lump sum in that tax year.

https://www.gov.uk/deferring-state-pension/what-you-get

Dawn7765

He has a small private pension and we have some interest and some small dividends but this should only come to around £9,500.  He has retired now so no wages.  The lump sum will be quite substantial (around 63k) and he is planning to defer again.

Dazed_and_C0nfused

Linton said:

The lump sum from a defered SP is taxed at your current rate, ie the rate at which you would be taxed without the lump sum in that tax year.

https://www.gov.uk/deferring-state-pension/what-you-get

Not quite, it's not the rate that matters, it's the rate band.

If you have some interest or dividends that are taxed at 0% within the basic rate band then you would have to pay 20% on the State Pension lump sum despite not paying any tax at 20% without it.

https://www.taxadvisermagazine.com/article/lump-sums