State Pension vs Income Tax Threshold

Cricketthedog

I don’t know if has come to the attention of the DWP or the Treasury, but the increase due to come into force in April for the State Pension, In some cases (ie pension +protected amount) , will  result in the yearly Pension becoming more than the income tax personal allowance. This means that I, for one, will be seeing an increase of £527 over the income tax threshold,  resulting in me paying approx. £105 in tax, so in reality my increase will be   a 6.8% increase not the 8.5% promised.

I understand that we all have to take a share of the tax burden, but I have done that all my life for 55 years, now when I need the income from my pension in these expensive times, it is being given by one hand and taken away with the other. Pensioners don’t have the luxury of increasing their income from changing employment.

Is there the possibility of the income tax threshold rising? Maybe that’s a question that many others will start asking soon when they realise that their hard earned pensions will be  eaten away by paying tax

Dazed_and_C0nfused

This is nothing new, people receiving the old "basic" State Pension could be getting best part of £20k in State Pension.

If you think the governments policy is wrong then you could write to the Chancellor and outline your objection.  Or your MP if they are Conservative.

MTB1986

Cricketthedog said:

I don’t know if has come to the attention of the DWP or the Treasury, but the increase due to come into force in April for the State Pension, In some cases (ie pension +protected amount) , will  result in the yearly Pension becoming more than the income tax personal allowance. This means that I, for one, will be seeing an increase of £527 over the income tax threshold,  resulting in me paying approx. £105 in tax, so in reality my increase will be   a 6.8% increase not the 8.5% promised.

I understand that we all have to take a share of the tax burden, but I have done that all my life for 55 years, now when I need the income from my pension in these expensive times, it is being given by one hand and taken away with the other. Pensioners don’t have the luxury of increasing their income from changing employment.

Is there the possibility of the income tax threshold rising? Maybe that’s a question that many others will start asking soon when they realise that their hard earned pensions will be  eaten away by paying tax

I think most people in receipt of income, whether from pensions or employment, would consider it “hard earned” - this doesn’t negate the need to pay tax on it, however.  

I very much doubt that the government intend to maintain the personal allowance threshold if it begins to exceed the annual amount of the new state pension, so I think they will increase the personal allowance as and when that happens to enable those who solely receive that new SP income to avoid paying tax on it. That’s purely my conjecture though. 

Brie

There was a pop up online earlier about 3 taxes being cut or abolished including inheritance tax.  The line was that it was the Tory's first step to upping their ratings in the polls.  If they cut IHT (which of course only affects the well off) then they might balance it by raising the tax allowance to buy the votes of the less well off pensioners.   In the spring budget perhaps??

If not there are lots of people who will be caught out by a tax bill they don't have the savings to pay.  

unforeseen

My state pension pushed me into the 40% tax bracket. Such is life

pinnks

First point to note is that your protected payment rises by CPI, not earnings, so (unfortunately for you) that element of your pension will increase by 6.7%, not 8.5%.  Cold comfort but that will mean your tax will be lower...

It is possible that one of the pre-election give-aways on 6 March will be an increase in the personal allowance, though based on the current government's policy aims of getting people back into work, my guess is that any give-aways would not be designed to benefit those not in work.  But as Dazed_and_C0nfused says, the only option is to lobby your MP.

Hoenir

MTB1986 said:

Cricketthedog said:

I don’t know if has come to the attention of the DWP or the Treasury, but the increase due to come into force in April for the State Pension, In some cases (ie pension +protected amount) , will  result in the yearly Pension becoming more than the income tax personal allowance. This means that I, for one, will be seeing an increase of £527 over the income tax threshold,  resulting in me paying approx. £105 in tax, so in reality my increase will be   a 6.8% increase not the 8.5% promised.

I understand that we all have to take a share of the tax burden, but I have done that all my life for 55 years, now when I need the income from my pension in these expensive times, it is being given by one hand and taken away with the other. Pensioners don’t have the luxury of increasing their income from changing employment.

Is there the possibility of the income tax threshold rising? Maybe that’s a question that many others will start asking soon when they realise that their hard earned pensions will be  eaten away by paying tax

I very much doubt that the government intend to maintain the personal allowance threshold if it begins to exceed the annual amount of the new state pension, so I think they will increase the personal allowance as and when that happens to enable those who solely receive that new SP income to avoid paying tax on it. That’s purely my conjecture though. 

Would seem a logical step for the personal allowance to be brought into line with the new state pension. If nothing else but for administrative reasons. Any other pension income then becoming taxable by default. 

BoGoF

pinnks said:

First point to note is that your protected payment rises by CPI, not earnings, so (unfortunately for you) that element of your pension will increase by 6.7%, not 8.5%.  Cold comfort but that will mean your tax will be lower...

No, the triple lock meant it increased by average increase in earnings of 8.5%

westv

Hoenir said:

MTB1986 said:

Cricketthedog said:

I don’t know if has come to the attention of the DWP or the Treasury, but the increase due to come into force in April for the State Pension, In some cases (ie pension +protected amount) , will  result in the yearly Pension becoming more than the income tax personal allowance. This means that I, for one, will be seeing an increase of £527 over the income tax threshold,  resulting in me paying approx. £105 in tax, so in reality my increase will be   a 6.8% increase not the 8.5% promised.

I understand that we all have to take a share of the tax burden, but I have done that all my life for 55 years, now when I need the income from my pension in these expensive times, it is being given by one hand and taken away with the other. Pensioners don’t have the luxury of increasing their income from changing employment.

Is there the possibility of the income tax threshold rising? Maybe that’s a question that many others will start asking soon when they realise that their hard earned pensions will be  eaten away by paying tax

I very much doubt that the government intend to maintain the personal allowance threshold if it begins to exceed the annual amount of the new state pension, so I think they will increase the personal allowance as and when that happens to enable those who solely receive that new SP income to avoid paying tax on it. That’s purely my conjecture though. 

Would seem a logical step for the personal allowance to be brought into line with the new state pension. If nothing else but for administrative reasons. Any other pension income then becoming taxable by default. 

I thought it wasn't going to change for another 5 (?) years.

Silvertabby

Even with next April's 8% increase those on just the nSP (who haven't given part of their allowance to their spouse) will still be below the current personal tax allowance.

As Dazed says, there are many 1000s of 'old' pensioners on way more than the nSP due to high rates of SERPS/SP2 and/or deferral at the much more generous old scheme rates.  They manage - it's just a matter of tucking money away to pay an expected bill.

pinnks

BoGoF said:

pinnks said:

First point to note is that your protected payment rises by CPI, not earnings, so (unfortunately for you) that element of your pension will increase by 6.7%, not 8.5%.  Cold comfort but that will mean your tax will be lower...

No, the triple lock meant it increased by average increase in earnings of 8.5%

Additional pension under the old rule and protected payments under the new rules are not covered by the Triple Lock and increase, by law, by the CPI.