Income tax and pensioners

dog_nanny

I've just realised that the combination of freezing the personal tax allowance and increasing state pension has put my Mother's income about £200 above the personal allowance.

Is it her (i.e. my) responsibility to point this out to HMRC? Or will they spot it themselves? Or will they not bother to chase a 90 year-old pensioner for £40 of tax?

She has no other income so is not on PAYE. As far as I know she has had no contact with HMRC since retiring 30 years ago.

la531983

Unless the personal allowance amounts change what will likely happen in this case is that she will be sent a tax bill after the event for £40. So suggest she keeps 80p a week aside for it. 

Brie

la531983 said:

Unless the personal allowance amounts change what will likely happen in this case is that she will be sent a tax bill after the event for £40. So suggest she keeps 80p a week aside for it. 

Or pay it for her as a mother's day present.

Frankly I keep thinking one of the political parties will spot this and use it as a reason to increase the personal allowance given the amount of work and cost it will incur to deal with these small amounts.  

molerat

It will be interesting to see how they deal with collecting these small tax amounts as there is going to be a massive increase in pensioners due tax with no other income. My sister in law's tax account shows this year's tax free amount at -£175.

eskbanker

Brie said:

Frankly I keep thinking one of the political parties will spot this and use it as a reason to increase the personal allowance given the amount of work and cost it will incur to deal with these small amounts.  

Where would you draw the line?  Some will be receiving substantially more than £12,570....

la531983

eskbanker said:

Brie said:

Frankly I keep thinking one of the political parties will spot this and use it as a reason to increase the personal allowance given the amount of work and cost it will incur to deal with these small amounts.  

Where would you draw the line?  Some will be receiving substantially more than £12,570....

Increasing the PA to at least the amount of the basic New State Pension seems the obvious solution, no need to go mad.

eskbanker

la531983 said:

eskbanker said:

Brie said:

Frankly I keep thinking one of the political parties will spot this and use it as a reason to increase the personal allowance given the amount of work and cost it will incur to deal with these small amounts.  

Where would you draw the line?  Some will be receiving substantially more than £12,570....

Increasing the PA to at least the amount of the basic New State Pension seems the obvious solution, no need to go mad.

The PA of £12,570 is already above the basic New State Pension (circa £11.5K), but those on the old scheme can earn significantly more....

Grumpy_chap

Brie said:

Frankly I keep thinking one of the political parties will spot this and use it as a reason to increase the personal allowance given the amount of work and cost it will incur to deal with these small amounts.  

It would be an equally valid move to end the Triple Lock to save the state pensioners from the burden of income tax

badmemory

My state pension already exceeds my personal allowance so I have some experience of this.  I do not any longer have to file self assessment & have been told that even if I do they will ignore it.  So what happens next.  HMRC will do what they call a simple assessment.  It is basically their version of what the self assessment would be.  Check it carefully as the DWP are notorious for notifying the incorrect state pension figure (more later).  This should arrive in about the July after the end of the tax year with payment due by the end of the next January.  So it is not urgent.

As an aside to this despite what people say HMRC are understaffed & now frankly underskilled whoever you speak to on the phone can mostly, unless you are lucky, say what the script says.  I do worry that the more of this the aged systems have to deal with the slower they will become, as in July could become October.

As for the correct state pension figure.  Most years this is made up of one week at the old rate & 51 weeks at the new.  DWP usually notify 52 weeks at the new.  It doesn't sound much different does it.  But if your state pension is enough to pay tax on on its own then it is over £200.  10% increase is £20 which is £4 in tax that would not actually be due.  I believe in paying every penny due but not a single penny that isn't

Ferro

The underpayment tolerance was £50 last time I remember although I had heard it had increased - can’t remember what to and, therefore, I may have dreamt it. 

https://www.rossmartin.co.uk/sme-tax-news/636-paye-tolerances

Dazed_and_C0nfused

Ferro said:

The underpayment tolerance was £50 last time I remember although I had heard it had increased - can’t remember what to and, therefore, I may have dreamt it. 

https://www.rossmartin.co.uk/sme-tax-news/636-paye-tolerances

Someone recently posted about a small overpayment and following a conversation with HMRC says they were told £50 is still the figure (for tax owed to HMRC).

But whether that is true I don't know.  About 10-12 years it was well publicised as £300 but that can only have been temporary.