Taxation of State Pension

Silvertabby

blue.peter said:

I'm not sure how politically acceptable it would be to have state pensions exceeding the personal allowance, though. I hope that future Chancellors would find it too unpalatable.

I'm not sure how politically acceptable it would be to have state pensions exceeding the personal allowance, though. I hope that future Chancellors would find it too unpalatable.

Has been happening for some time.  A neighbour's State pension is over £22K, due to a combination of high SERPS/SP2 and 5 years of deferral at the old, much more generous, rate of 10% per year.  He may be at the top end of the scale, but there are many pensioners out there on £14K/£15K + per year old basic State pension plus SERPS/SP2.  

Qyburn

Silvertabby said:

Has been happening for some time.  A neighbour's State pension is over £22K, due to a combination of high SERPS/SP2 and 5 years of deferral at the old, much more generous, rate of 10% per year.  He may be at the top end of the scale, but there are many pensioners out there on £14K/£15K + per year old basic State pension plus SERPS/SP2.  

Does your neighbour have other income?

I had assumed that people who earned significant amounts of SERPS/SP2 would have been high earners, probably with other pension provisions from which tax would be collected as they go.

Thats a different case, socially, from someone whose sole income is the NSP receiving an unexpected demand for tax in arrears.

Silvertabby

Qyburn said:

Silvertabby said:

Has been happening for some time.  A neighbour's State pension is over £22K, due to a combination of high SERPS/SP2 and 5 years of deferral at the old, much more generous, rate of 10% per year.  He may be at the top end of the scale, but there are many pensioners out there on £14K/£15K + per year old basic State pension plus SERPS/SP2.  

Does your neighbour have other income?

I had assumed that people who earned significant amounts of SERPS/SP2 would have been high earners, probably with other pension provisions from which tax would be collected as they go.

Thats a different case, socially, from someone whose sole income is the NSP receiving an unexpected demand for tax in arrears.

Yes, he does, but I was just pointing out that not all  State pensions are under the personal tax allowance limit.  

Those who don't have any other income don't have to submit a self assessment tax return - instead, HMRC will issue a simple assessment bill after the end of the tax year, giving the pensioner at least 3 months to pay.  Just as happens now for those on just the (old) State pension of more than £12,570.

But, yes, I can just see the tabloid pictures of an elderly person wringing their hands in front of a heater and pondering which bill to pay first - food, heating or tax.

xylophone

and 5 years of deferral 

The fact that he could afford to defer would indicate some other form of income/savings/ support from a spouse or other source?

JoeCrystal

Silvertabby said:

Qyburn said:

Silvertabby said:

Has been happening for some time.  A neighbour's State pension is over £22K, due to a combination of high SERPS/SP2 and 5 years of deferral at the old, much more generous, rate of 10% per year.  He may be at the top end of the scale, but there are many pensioners out there on £14K/£15K + per year old basic State pension plus SERPS/SP2.  

Does your neighbour have other income?

I had assumed that people who earned significant amounts of SERPS/SP2 would have been high earners, probably with other pension provisions from which tax would be collected as they go.

Thats a different case, socially, from someone whose sole income is the NSP receiving an unexpected demand for tax in arrears.

Yes, he does, but I was just pointing out that not all  State pensions are under the personal tax allowance limit.  

Those who don't have any other income don't have to submit a self assessment tax return - instead, HMRC will issue a simple assessment bill after the end of the tax year, giving the pensioner at least 3 months to pay.  Just as happens now for those on just the (old) State pension of more than £12,570.

But, yes, I can just see the tabloid pictures of an elderly person wringing their hands in front of a heater and pondering which bill to pay first - food, heating or tax.

Or maybe just maybe, today's budget might have extra tax personal allowance for anyone over SPA or increase general personal allowance. Looking forward to reading the Budget documents soon!

Grumpy_chap

JoeCrystal said:

today's budget might have extra tax personal allowance for anyone over SPA 

It does rather seem as though there are a number of State Pensioners who really want to double-dip.
First, an increase in SP well above the rate of increase for workers, or the population at large.
Second, an exemption from Income Tax when that increase results in income pushing into the taxable range.

xylophone

Thats a different case, socially, from someone whose sole income is the NSP receiving an unexpected demand for tax in arrears.

NSP will be £221.20 a week from April - it would need to be around £242 a week before tax was payable but with the PA frozen until 2028......  

And if my only income was say £250 a week and no savings to speak of, I'd certainly be wondering about how I'd feed myself and pay for water, gas, electricity, council tax, telephone, internet, cleaning materials (personal and house), transport (unless bus service was adequate), clothing, shoes.....etc

xylophone

First, an increase in SP well above the rate of increase for workers,

The increase in NSP and Basic SP was based on increase in average earnings.

Let's suppose a person whose only income is  the state pension and who, as a result of the increase, now receives  say £250 a week.

He will pay tax on the amount by which he exceeds the PA which has been frozen at £12570 until 2028.

The worker is also affected by the frozen allowance but he is now to pay less NI.

Tax cut for the worker and tax increase for the pensioner? 

pinnks

Grumpy_chap said:

JoeCrystal said:

today's budget might have extra tax personal allowance for anyone over SPA 

It does rather seem as though there are a number of State Pensioners who really want to double-dip.
First, an increase in SP well above the rate of increase for workers, or the population at large.
Second, an exemption from Income Tax when that increase results in income pushing into the taxable range.

Just on a point of accuracy, the statutory requirement is to increase the state pension by at least the increase in average earnings, i.e. "the rate of increase for workers" as you describe it.  This year that was 8.5%, so the pension is increasing in line with the minimum statutory requirement and the triple lock and arguments around it are totally irrelevant.

That said I do not think we should start playing around with the personal allowance by reason of age.  Nor for that matter do I agree with lobbing 4% off NIC as that is equally unjustifiable but that is the way the government has decided to please one part of the population and annoy the rest...  

hugheskevi

JoeCrystal said:

Silvertabby said:

Qyburn said:

Silvertabby said:

Has been happening for some time.  A neighbour's State pension is over £22K, due to a combination of high SERPS/SP2 and 5 years of deferral at the old, much more generous, rate of 10% per year.  He may be at the top end of the scale, but there are many pensioners out there on £14K/£15K + per year old basic State pension plus SERPS/SP2.  

Does your neighbour have other income?

I had assumed that people who earned significant amounts of SERPS/SP2 would have been high earners, probably with other pension provisions from which tax would be collected as they go.

Thats a different case, socially, from someone whose sole income is the NSP receiving an unexpected demand for tax in arrears.

Yes, he does, but I was just pointing out that not all  State pensions are under the personal tax allowance limit.  

Those who don't have any other income don't have to submit a self assessment tax return - instead, HMRC will issue a simple assessment bill after the end of the tax year, giving the pensioner at least 3 months to pay.  Just as happens now for those on just the (old) State pension of more than £12,570.

But, yes, I can just see the tabloid pictures of an elderly person wringing their hands in front of a heater and pondering which bill to pay first - food, heating or tax.

Or maybe just maybe, today's budget might have extra tax personal allowance for anyone over SPA or increase general personal allowance. Looking forward to reading the Budget documents soon!

Higher Personal Allowance for pensioners?

That takes me back a bit, although only to 2015/16.