State Pension vs Income Tax Threshold

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81965800#Comment_81965800

The thread is 2.5 years old.. There are more recent threads ( mainly later last year) discussing the point you are asking.

Marcon

https://forums.moneysavingexpert.com/discussion/comment/81965800#Comment_81965800

As things stand - albeit they could change - yes, you'll be taxed. The current proposal applies only to those with the standard pension. Deferral means you get more than the standard.

Grumpy_chap

https://forums.moneysavingexpert.com/discussion/comment/81966154#Comment_81966154

That reflects what appears to have been said by members of the Government but that might well be seen as inequitable. An individual who deferred their income (which would potentially not have been taxed) then being taxed more on that income when received later compared to someone who took the same income sooner.

Marcon

The whole idea as proposed is widely seen as inequitable, but I can only answer on the basis of current proposals.

Silvertabby

Exactly. The current idea is that only those on just the basic (old) or single tier (new) State pension, without any additions (SERPS/SP2/Inherited spousal benefits/deferral, etc) will be exempt from paying income tax.

In round figures, if the full single tier pension increases to £13K in April 2027, someone on JUST that won't pay tax. But someone on the old basic State pension of £10K plus £3K inherited spousal pension/SERPS etc will be liable for £86 tax. Someone must have decided that this scheme is fair and equitable - but I'm afraid that their logic is beyond mine.

Marcon

Good summary of the issues here: https://www.pensionsage.com/pa/Reeves-confirms-state-pension-will-remain-tax-free-for-those-with-no-other%20income.php

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81966278#Comment_81966278

Although all the people on just the standard new State Pension who make the mistake of having a non ISA account paying interest will end up in the same boat and would have to pay the tax due on the State Pension.

Which could well rule out lots of people.

Grumpy_chap

https://forums.moneysavingexpert.com/discussion/comment/81966299#Comment_81966299

Why is non-ISA interest considered income but ISA interest is not considered income in that commented scenario?

I suspect the ideas that have been mentioned by the various representatives from Government will be made into something simpler by the time the actual rules get firmed up. AIUI, we only have comments thus far and no actual rules. I understand the whole idea was all around simplification. It would be a counter-productive simplification if the rules are as complicated as some suggestions imply.

cloud_dog

(I appreciate this may be obvious but...) ISA gains (interest, dividends, capital) are free from any direct taxations (income tax, CGT).

So for people with tax liable investments, dump them in your ISA.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81966318#Comment_81966318

Maybe I'm jumping to conclusions but ISA interest isn't normally reported to HMRC whereas taxable interest is reported and given this is effectively an income tax measure I have assumed non taxable income isn't going to be a factor.

But maybe pensioners will now have to start notifying HMRC about any non taxable income they receive. But I do think that's highly unlikely.