Will all pensioners have to file a tax return!

Morrismaestro

Has anyone else noticed that if the current plan to freeze personal allowance's until 2028 continues, the Full State Pension will exceed the personal allowance before 2028, assuming the tripple lock continues. Then everyone on a full state pension will have to file a tax return and pay tax! I can only assume the Government will have to either end the freeze before 2028 or stop the tripple lock. I know which one would prove to be more popular!

la531983

Surely most pensioners pay tax anyway as they will have been sensible enough to have private pensions? 

Silvertabby

I strongly suspect that if/when the nSP exceeds the annual allowance then the latter will be tweeked to an amount just over the nSP.  Far easier, and much more politically acceptable, than having Ks of pensioners on just the State pension having to do tax returns.  Cue sad newspaper  pictures of granny having to choose between eating, heating or paying her tax demand.

Brie

la531983 said:

Surely most pensioners pay tax anyway as they will have been sensible enough to have private pensions? 

Some people are not that sensible or haven't been in jobs where a work pension was available or didn't earn enough to be able to afford a private pension.  And will have no idea about doing a tax return.

I've met quite a few otherwise sensible individuals over many years who claim that pensions are a rip off so won't pay into one, even with an employer contributing a healthy chunk.  Lots of people who become employed and say they don't want to join the work scheme.  And when auto enrolled a couple of years later only see that they are paying out for something they don't understand.  

For myself I think I'll be ok but don't know as I've never filed a tax return in the UK.  I don't mind if I have to but have no idea what it entails or when it is required.  I used to do my own tax return and other family members' as well when I lived elsewhere.  Hopefully there will be some assistance provided by the government if a lot of 80 or 90 yos living alone, in care homes, wherever and without a computer suddenly have to try to do something.

Pat38493

It's actually very easy to file a tax return online if it's just based on a single income source.  However I agree that this is very unlikely to happen for the reason that Silvertabby mentioned and also because it would presumably cause a huge increase in workload to HMRC and/or whoever codes the pension payment systems.

molerat

Next year it is likely that those that have given away their 10% allowance and receiving the full new pension will be paying tax, a 7% increase is going to tip the pension just over the £11310 threshold.

Dazed_and_C0nfused

Morrismaestro said:

Has anyone else noticed that if the current plan to freeze personal allowance's until 2028 continues, the Full State Pension will exceed the personal allowance before 2028, assuming the tripple lock continues. Then everyone on a full state pension will have to file a tax return and pay tax! I can only assume the Government will have to either end the freeze before 2028 or stop the tripple lock. I know which one would prove to be more popular!

HMRC have a process in place to avoid this.

If the only reason for a return would be because tax due on State Pension cannot be collected via PAYE then they will issue a Simple Assessment calculation (PA302) showing the tax due.

If this is issued timeously then the tax would have to be paid on 31 January after the end of the tax year.  Without having to file a return.

eastcorkram

Do people in receipt of state pension, and maybe other pensions or employment income, currently have to fill in a tax return??

Dazed_and_C0nfused

eastcorkram said:

Do people in receipt of state pension, and maybe other pensions or employment income, currently have to fill in a tax return??

Some do but the majority don't.

It will normally be another reason which requires a return, for example HICBC or tapered Personal Allowance.

Just having pension income itself isn't a reason to file a return.

Silvertabby

la531983 said:

Surely most pensioners pay tax anyway as they will have been sensible enough to have private pensions? 

The tax due from my State pension is taken from my occupational pension, so no tax return needed.  There are currently pensioners in receipt of the old basic State pension plus SERPS/SP2 who are already in excess of the annual.allowance, and who have to do a (simplified version) tax return without any problems.  But suddenly expecting Ks of pensioners to do likewise is just asking for trouble.

Marcon

What is Simple Assessment?

HMRC introduced Simple Assessment for certain taxpayers with only a state pension for 2016/17.

Individuals in Simple Assessment do not have to submit a tax return to pay tax on the taxable part of their pension. Instead, HMRC send the individual a calculation of tax owed for the tax year (PA302). 

https://www.litrg.org.uk/tax-guides/tax-basics/what-simple-assessment