State pension paid into someone else's account - tax liability

whsturm

The rules for State Pension payouts (on the Government website) allow for state pensions to be paid into "someone else's account".  My question relates to the tax liabilities arising from that choice. I assume that tax is already deducted from the person receiving the state pension (as part of their overall taxable income which may include private pension income too) so that no further tax is due by the 'someone else' into whose account the pension is actually paid? In other words do state pension payments received by someone else (on behalf of a pensioner) count in any way as income for the 'someone else'?

And a follow-up question - even if the pension which 'someone else' receives on behalf of, typically, a relative is not countable as income by that 'someone else', what about interest accrued on those pension payments if they are kept in a savings account? Is accrued interest (albeit small) part of the pensioner's overall tax liability or is it attributable to the account holder in which the pension money resides?

Unfortunately I can't find any explanatory information on the State Pension website on the tax consequences of electing 'someone else' to receive a state pension on behalf of a relative.

molerat

Tax is not deducted from the state pension, it is paid gross but is taxable income and as you say any tax due will be taken from other income or through simple / self assessment.  The recipient of the pension is liable for any tax due, the owner of the account is irrelevant for taxation purposes.  If that account accrues interest then the account owner is responsible for any tax due on that element.  One problem could be if the account owner is in receipt of income related benefits.

Hoenir

State pension is paid gross, untaxed. It will be treated as income of the recepient. Where it is paid into to is irrelevant. 

Likewise tax on interest is the liability of the account holder. Source of the funds doesn't matter, 

DE_612183

It's your income regardless of where it gets paid - the tax responsibility resides with you.

artyboy

It's almost as though HMRC spotted the potential tax dodge of oldies getting their pension paid into their great grandchild's savings account...

Nice try though. 🤣

whsturm

DE_612183 said:

It's your income regardless of where it gets paid - the tax responsibility resides with you.

Thanks - I assume that by 'your income' you mean the pensioner receiving the income. This would accord with the two earlier replies too.