Old v New state pension

molerat

squirrelpie said:

militarymick said:

    This only reinforces the fact that the whole UK tax/pension system is an overcomplex ill thought through jungle.The point of any legislation is for it to be simple fair and transparent to 'the man in the street'.

I agree wholeheartedly with your first sentence. I take issue with the second though. Whilst it is a noble goal to make life easy for 'the man in the street', it's also important to make sure there aren't holes that unscrupulous people can find their way through, and that adds complications sometimes. And rules to deal with unusual cases fairly, etc etc. But sure there's huge room for improvement.

2024-25 will be a fun year. If there is, as expected, a 7% uplift in SP then due to the freezing of allowances anyone who is giving their 10% tax code away and receiving a full new SP will be on a K tax code.  That will bring some interesting posts on here !

NedS

molerat said:

squirrelpie said:

militarymick said:

    This only reinforces the fact that the whole UK tax/pension system is an overcomplex ill thought through jungle.The point of any legislation is for it to be simple fair and transparent to 'the man in the street'.

I agree wholeheartedly with your first sentence. I take issue with the second though. Whilst it is a noble goal to make life easy for 'the man in the street', it's also important to make sure there aren't holes that unscrupulous people can find their way through, and that adds complications sometimes. And rules to deal with unusual cases fairly, etc etc. But sure there's huge room for improvement.

2024-25 will be a fun year. If there is, as expected, a 7% uplift in SP then due to the freezing of allowances anyone who is giving their 10% tax code away and receiving a full new SP will be on a K tax code.  That will bring some interesting posts on here !

I wonder if the government will reconsider the tax allowance freeze once the new SP (or pension credit) amount exceeds the personal tax allowance, which will surely happen before 2028? Is Pension Credit taxable income?

Historically, I cannot see a time (certainly since 1990) that a full/basic SP has ever exceeded the personal tax free allowance and would incur income tax in the absence of other taxable income. Presumably this would be politically significant taxing poor hard up pensioners? The easy option would be to increase the personal tax allowance threshold for pensioners to equal a full new state pension.

squirrelpie

Or maybe, in the land of flying pigs, the government might decide that the triple lock should be maintained and interpret it as meaning they need to increase the gross amount of SP by more than inflation so that the net amount does increase by inflation

hyubh

Presumably this would be politically significant taxing poor hard up pensioners? The easy option would be to increase the personal tax allowance threshold for pensioners to equal a full new state pension.

Why should pensioners be taxed (even) less than the working population, who actually pay for their state pensions...? (And I realise they already are taxed less, if you understand NI as a tax...)

uk1

hyubh said:

Presumably this would be politically significant taxing poor hard up pensioners? The easy option would be to increase the personal tax allowance threshold for pensioners to equal a full new state pension.

Why should pensioners be taxed (even) less than the working population, who actually pay for their state pensions...? (And I realise they already are taxed less, if you understand NI as a tax...)

That seems to be right.  In fact having an SP higher than the tax allowance might enable the defence of the triple lock instead of the often suggested means testing in that those with other income will pay tax. 

Dazed_and_C0nfused

NedS said:

molerat said:

squirrelpie said:

militarymick said:

    This only reinforces the fact that the whole UK tax/pension system is an overcomplex ill thought through jungle.The point of any legislation is for it to be simple fair and transparent to 'the man in the street'.

I agree wholeheartedly with your first sentence. I take issue with the second though. Whilst it is a noble goal to make life easy for 'the man in the street', it's also important to make sure there aren't holes that unscrupulous people can find their way through, and that adds complications sometimes. And rules to deal with unusual cases fairly, etc etc. But sure there's huge room for improvement.

2024-25 will be a fun year. If there is, as expected, a 7% uplift in SP then due to the freezing of allowances anyone who is giving their 10% tax code away and receiving a full new SP will be on a K tax code.  That will bring some interesting posts on here !

I wonder if the government will reconsider the tax allowance freeze once the new SP (or pension credit) amount exceeds the personal tax allowance, which will surely happen before 2028? Is Pension Credit taxable income?

Historically, I cannot see a time (certainly since 1990) that a full/basic SP has ever exceeded the personal tax free allowance and would incur income tax in the absence of other taxable income. Presumably this would be politically significant taxing poor hard up pensioners? The easy option would be to increase the personal tax allowance threshold for pensioners to equal a full new state pension.

That system was abolished a few years ago and bringing it back would add some complexity to the tax system.

Married Couple's Allowance will help some older pensioners but I suspect a return to the old multiple Personal Allowances is unlikely.

xylophone

Why should pensioners be taxed (even) less than the working population, who actually pay for their state pensions...? (And I realise they already are taxed less, if you understand NI as a tax...)

Those over state pension age do not pay NI  on earned income but other than that, like everybody else, if their income (including pension income) is in excess of their allowances, they will pay tax at the rate appropriate to their circumstances.