Personal Savings Allowance for a Pensioner

jonnypb

How is the personal savings allowance determined for someone who has retired and receives a pension?

When earning, I know that the higher rate tax threshold is £50,270, but once retired if your sole income is from a pension (approx £3300 a month) and a small amount of interest from savings, does that put you as a basic rate, or higher rate tax payer?

A net income of £3300 from a pension would be the equivalent of a salary over £52,000 if you were still working.

Dazed_and_C0nfused

jonnypb said:

How is the personal savings allowance determined for someone who has retired and receives a pension?

When earning, I know that the higher rate tax threshold is £50,270, but once retired if your sole income is from a pension (approx £3300 a month) and a small amount of interest from savings, does that put you as a basic rate, or higher rate tax payer?

A net income of £3300 from a pension would be the equivalent of a salary over £52,000 if you were still working.

The exact same way as anyone else.

You calculate your tax liability ignoring the 0% savings nil rate band (aka PSA) and if you are a basic rate payer you then recalculate it using £1,000 for the savings nil rate band.

If higher rate recalculate it using £500 for the savings nil rate band.

NB.  Net income is never a factor.

Albermarle

From an income tax point of view it makes no difference if you are a pensioner or not.
HMRC only really care about what taxable income you are receiving.

Working backwards from your after tax income is confusing . How much is your pension before any tax is taken ?

jonnypb

Albermarle said:

From an income tax point of view it makes no difference if you are a pensioner or not.
HMRC only really care about what taxable income you are receiving.

Working backwards from your after tax income is confusing . How much is your pension before any tax is taken ?

It's for a friend, they receive approx £3380 a month from their different pensions.  The last tax year they paid approx £1800 tax in July and have just paid approx £1990 tax in January.

Brie

Wonder why the pensions aren't being taxed at source?  

Marcon

Brie said:

Wonder why the pensions aren't being taxed at source?  

They are - OP says the income is net:

jonnypb said:

 if your sole income is from a pension (approx £3300 a month) and a small amount of interest from savings, does that put you as a basic rate, or higher rate tax payer?

A net income of £3300 from a pension would be the equivalent of a salary over £52,000 if you were still working.

xylophone

I wonder is the pensioner in question receiving a state pension higher than his Personal Allowance and even with K codes, still not

enough tax being taken by pension payroll to satisfy his obligation? 

SacredStephan

The PSA is not dependent on their age.
Paying tax in July and January suggests that they are or were self-employed.

jonnypb

It’s a state pension and also 3 private pensions that they have.

Sorry I’m a long way off retirement, so don’t fully understand pensions yet, should the pension be taxed at source?

They weren’t self employed, from what I understand they have someone who does the tax return for them.

pinnks

I wonder why they are still in Self Assessment if they have only 3 PAYE sources (the 3 private pensions) and a state pension?  A call to HMRC should resolve that.

The 3 private pensions are treated the same way as 3 different employments would be treated for PAYE (but no NIC of course).  The state pension is paid gross and the tax code will be reduced to cover that amount of income. 

If their gross (taxable) income from all 4 pensions is less than £52k, then they are a basic rate taxpayer and the PSA will be £1,000.

And that's it.

Dazed_and_C0nfused

jonnypb said:

It’s a state pension and also 3 private pensions that they have.

Sorry I’m a long way off retirement, so don’t fully understand pensions yet, should the pension be taxed at source?

They weren’t self employed, from what I understand they have someone who does the tax return for them.

I suspect that there is more to this than you are aware of.

Maybe they have a large amount of untaxed interest or dividend income?

Or they are possibly completing tax returns unnecessarily but that may suit them for some reason.

Each of the pensions will have a tax code (assuming they aren't paid from abroad), these might typically look like 100L (main one in HMRC's eyes with State Pension factored in) plus two with BR (20%) or D0 codes (40%).