Income Tax bands frozen till April 2028 view?

newatc

Amazingly (to me as retiree for many years), I find myself heading towards being a higher rate tax payer and additionally paying tax on savings interest.
Does Simple Assessment (which I never knew existed before reading this thread) stop the HMRC trying to retrieve what they consider to be underpaid tax by changes in Tax Code?

Dazed_and_C0nfused

newatc said:

Amazingly (to me as retiree for many years), I find myself heading towards being a higher rate tax payer and additionally paying tax on savings interest.
Does Simple Assessment (which I never knew existed before reading this thread) stop the HMRC trying to retrieve what they consider to be underpaid tax by changes in Tax Code?

AIUI it's primarily aimed at those where collection via the tax code isn't possible.  For example tax due on State Pension where there is no employment or other pension that a tax code is needed for.  Or larger amounts (£3k+).

But if your tax code can be used to collect the tax (and it's under £3k) then that is the default method.

But you are always notified of an actual tax underpayment in the year prior to when it will be included in your tax code so if you don't want it collecting via your tax code you just need to send a voluntary payment to HMRC and ask for the underpayment to be removed.

For example if HMRC sent you a P800 now detailing tax owed for 2022-23 it wouldn't start to be collected until 6 April 2024 so you would have plenty of time to make a voluntary payment and ensure the underpayment wasn't included in your 2024-25 tax code.

This doesn't apply to the current tax year though if that code is changed to try and collect the correct tax for this year.

Qyburn

From discussions with a colleague a couple of years ago there was no mechanism in place to tax the State Pension. If that's still the case then no matter how easy this Simple Assessment is, it still would mean thst those in receipt of SP only are going to be asked to pay back some of what they've received (and possibly spent).

In my opinion once it looks like tax will be due on the SP it needs to be collected as it's paid.

Silvertabby

Qyburn said:

From discussions with a colleague a couple of years ago there was no mechanism in place to tax the State Pension. If that's still the case then no matter how easy this Simple Assessment is, it still would mean thst those in receipt of SP only are going to be asked to pay back some of what they've received (and possibly spent).

In my opinion once it looks like tax will be due on the SP it needs to be collected as it's paid.

I still think that if looks like the nSP will breach the personal allowance before 2028 then the personal allowance will be increased to cover it.  Far easier than the scenario you describe.

MK62

Silvertabby said:

Qyburn said:

From discussions with a colleague a couple of years ago there was no mechanism in place to tax the State Pension. If that's still the case then no matter how easy this Simple Assessment is, it still would mean thst those in receipt of SP only are going to be asked to pay back some of what they've received (and possibly spent).

In my opinion once it looks like tax will be due on the SP it needs to be collected as it's paid.

I still think that if looks like the nSP will breach the personal allowance before 2028 then the personal allowance will be increased to cover it.  Far easier than the scenario you describe.

....ditto...

Linton

SouthCoastBoy said:

I think inflation at 5%+ will be around for a while due to the fact we consume more than we produce, benefits are a big problem that feeds into this, therefore I can see the triple lock being abandoned with the argument the poorest pensioners are protected by the benefits system, and therefore the sp may not breach the tax free threshold. 

WIth inflation at 5% the triple lock is irrelevent.

Dazed_and_C0nfused

Qyburn said:

From discussions with a colleague a couple of years ago there was no mechanism in place to tax the State Pension. If that's still the case then no matter how easy this Simple Assessment is, it still would mean thst those in receipt of SP only are going to be asked to pay back some of what they've received (and possibly spent).

In my opinion once it looks like tax will be due on the SP it needs to be collected as it's paid.

Pretty sure DWP would be resident to such a change, particularly as HMRC have already implemented a solution which removes the need for the pensioner to do anything other than make a payment once a year.

NedS

Linton said:

SouthCoastBoy said:

I think inflation at 5%+ will be around for a while due to the fact we consume more than we produce, benefits are a big problem that feeds into this, therefore I can see the triple lock being abandoned with the argument the poorest pensioners are protected by the benefits system, and therefore the sp may not breach the tax free threshold. 

WIth inflation at 5% the triple lock is irrelevent.

Not if average earnings are 6.5%

NedS

Qyburn said:

From discussions with a colleague a couple of years ago there was no mechanism in place to tax the State Pension. If that's still the case then no matter how easy this Simple Assessment is, it still would mean thst those in receipt of SP only are going to be asked to pay back some of what they've received (and possibly spent).

In my opinion once it looks like tax will be due on the SP it needs to be collected as it's paid.

Isn't it possible for some pre-2016 pensioners to already have old SP entitlements above £12570/year? If so, how do those pensioners with no other taxable income get taxed?

Dazed_and_C0nfused

NedS said:

Qyburn said:

From discussions with a colleague a couple of years ago there was no mechanism in place to tax the State Pension. If that's still the case then no matter how easy this Simple Assessment is, it still would mean thst those in receipt of SP only are going to be asked to pay back some of what they've received (and possibly spent).

In my opinion once it looks like tax will be due on the SP it needs to be collected as it's paid.

Isn't it possible for some pre-2016 pensioners to already have old SP entitlements above £12570/year? If so, how do those pensioners with no other taxable income get taxed?

Yes, it's possible to have £15k+.

Some may complete a Self Assessment return but there shouldn't be any need for that nowadays as HMRC can issue a Simple Assessment.

This is legally enforceable so HMRC can pursue any tax that doesn't get paid and the taxpayer has the right of appeal if they believe the calculation is wrong.

The tax should normally be paid by 31 January after the end of the tax year but this deadline is extended if there is a delay by HMRC in issuing the Simple Assessment.