Pensioner Taxation

Dazed_and_C0nfused

Retired2015 said:

I have a total pension of £39,000 and part of my £39,000 is being taxed at 40%.
If you are under pension age you will not be taxed until you exceed £50,270.
Because I am a pensioner, I am now being taxed at 40% when I exceed £37,570 (£50,270-12,570)
That seems unfair to me.

You are getting things sadly wrong somewhere along the line.

Even Scottish residents don't pay 40% (or 42%) tax on taxable income of £39,000.

Your tax liability will be this,

£39,000 less Personal Allowance £12,570 = £26,430 to be taxed

£26,430 x 20% = £5,286

You will pay all this tax on your private/company pension.  No tax will be deducted from your State Pension.

So each month you will get your State Pension in full and ~£440 tax will be deducted from your other pension(s).

NoMore

Do you mean £39000 in total including the state pension, in which case Dazed and confused post is correct.

If you mean you have a private pension(s)  of £39000 then depending on your state pension provision you may well pay some 40% tax.

Again as you've been told the state pension is taxable income just like any other pension income or a job. The only difference the tax, if any is due, is never directly taken from it.

I can see the political storm coming when the triple lock takes the new state pension above the personal allowance and suddenly the papers are full of stories about the government taxing the poor pensioners as if this is a brand new thing and its whichever government that's currently in power that has introduced it. The amount of people that currently think the state pension is tax free is a problem.

Stubod

Retired2015 said:

I have a total pension of £39,000 and part of my £39,000 is being taxed at 40%

...no it's not if that's your only / TOTAL income?

If you are under pension age you will not be taxed until you exceed £50,270.

..Oh yes you will, on anything over £12,570

Because I am a pensioner, I am now being taxed at 40% when I exceed £37,570 (£50,270-12,570)

..no you're not

That seems unfair to me

..you don't seem to understand how the tax system works..?

..The SP is not taxed directly, but it is still counted towards your overall income therefore  you have to pay more tax on your private pension to compensate. However this is offset by not paying any tax on your state pension, but the overall tax burden on your TOTAL income is exactly the same as it was before you got the SP, and it is the same for those who have not reacehed SP age.

..I really don't understand your problem, or why you consider that to be unfair..???....you get taxed according to your TOTAL income...always been the case as far as I am aware. Why should it be any different when you are retired?

Flugelhorn

Retired2015 said:

I have a total pension of £39,000 and part of my £39,000 is being taxed at 40%.
If you are under pension age you will not be taxed until you exceed £50,270.
Because I am a pensioner, I am now being taxed at 40% when I exceed £37,570 (£50,270-12,570)
That seems unfair to me.

it is not our  private / occupational pension that is being taxed more  - it is the state pension. 

If you are under pension age, then you don't get the state pension

you have to see income as a total - as it is you are receiving the state pension untaxed and the tax has to come from somewhere and that place is the private / occupational pension.

It is not unfair 

Linton

Retired2015 said:

I have a total pension of £39,000 and part of my £39,000 is being taxed at 40%.
If you are under pension age you will not be taxed until you exceed £50,270.
Because I am a pensioner, I am now being taxed at 40% when I exceed £37,570 (£50,270-12,570)
That seems unfair to me.

  Your total pension is £39K+State Pension.  This takes you above the £50270.

Famau

Retired2015 said:

I have a total pension of £39,000 and part of my £39,000 is being taxed at 40%.
If you are under pension age you will not be taxed until you exceed £50,270.
Because I am a pensioner, I am now being taxed at 40% when I exceed £37,570 (£50,270-12,570)
That seems unfair to me.

As etienegg says, you have to look at total income. When you get your pension, then just as per someone younger, if your income exceeds £50,270 you will start to pay tax on the amount exceeding it.   I am in a very similar position to you.  When my SP kicks in I will exceed the 40% threshhold and pay tax at 40% on the element that exceeds the threshhold.  Nothing wrong with that. You can argue about threshholds not moving with inflation but that's a different issue. I'm sorry, but I really don't see what the issue is here.

JoeCrystal

Retired2015 said:

Can anyone explain the rationale behind this please?
And when was this introduced?
To my mind, pensioners are being penalised unfairly.

Nope, it sounds like you are under the impression that you are penalised. You are taxed precisely like any other people who have taxable incomes. Clearly, you did not fully understand the tax rules.

horsewithnoname said:

When it was introduced? I think PAYE was introduced to pay for the Napoleonic wars? State pensions were some time later, but it’s certainly been a fair old while. 

Sorry to nitpick. Income taxes are introduced to pay for the Napoleonic wars. But don't worry, it is only temporary!    PAYE, on the other hand, was due to WW2 after a massive increase in the number of taxpayers, and wisely, they decided to make it as easy as possible for their employers to pay taxes. The PAYE system works well for someone on weekly or monthly pay. 

Ayr_Rage

Retired2015 said:

I have a total pension of £39,000 and part of my £39,000 is being taxed at 40%.
If you are under pension age you will not be taxed until you exceed £50,270.
Because I am a pensioner, I am now being taxed at 40% when I exceed £37,570 (£50,270-12,570)
That seems unfair to me.

Sorry, you're still getting it wrong and as a pensioner you get more net income than a working person on the same gross amount as you don't pay NI.

Mutton_Geoff

40% tax above  ........ up to £125,140

Not quite correct. It's 

40% tax above .. up to £100,000
60% tax up to £125,140
45% tax above that.

This is due to loss of personal allowance above £100k with £25,140 (£125,140 minus £100k) being double the personal allowance. The loss of personal allowance is done at £1 for each £2 earned hence the highest rate of 60% between £100,000 and £125,240.

Keep_pedalling

If the OP really wants to make things fare, maybe they should advocate pensioners having to pay NI contributions.