Pensioner Taxation

MattMattMattUK

Mutton_Geoff said:

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.

Those are the effective rates, but they are not the tax rates, the 20%/40%/45% rates are correct, however the effective rate always varies dependant on actual income due to the impact of the personal allowance, the way thresholds interact with income and the removal of the personal allowance for higher earners. 

eastcorkram

Keep_pedalling said:

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

I imagine that may well be here very soon! 

HappyHarry

If the OP were to donate their state pension income to a registered charity then they could avoid a lot of the angst and reduce their tax liability.

MK62

eastcorkram said:

Keep_pedalling said:

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

I imagine that may well be here very soon! 

Now that would be controversial........

Dazed_and_C0nfused

HappyHarry said:

If the OP were to donate their state pension income to a registered charity then they could avoid a lot of the angst and reduce their tax liability.

It wouldn't though.

As a basic rate payer the charity would be able to claim the basic rate tax credit but the op would not save any personal income tax.

They would also have a nice warm glow from inside, which might help make up for the loss of the Winter Fuel Allowance!

HappyHarry

Dazed_and_C0nfused said:

HappyHarry said:

If the OP were to donate their state pension income to a registered charity then they could avoid a lot of the angst and reduce their tax liability.

It wouldn't though.

As a basic rate payer the charity would be able to claim the basic rate tax credit but the op would not save any personal income tax.

They would also have a nice warm glow from inside, which might help make up for the loss of the Winter Fuel Allowance!

The OP is complaining that they are paying higher rate tax on some of their income due to the state pension. Can they not claim back the difference between higher rate and basic rate on their contributions - for the bit that falls in to the higher rate tax bracket at least?

Mutton_Geoff

MattMattMattUK said:

Mutton_Geoff said:

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.

Those are the effective rates, but they are not the tax rates, the 20%/40%/45% rates are correct, however the effective rate always varies dependant on actual income due to the impact of the personal allowance, the way thresholds interact with income and the removal of the personal allowance for higher earners. 

I agree but the maths is the same on rate paid vs taxable income. Many people, like the OP, expect the SP to be in some special category of earning, but it's not, it's just traditionally many people didn't pay tax on retirement because their pension income, inc from the state, was less than the threshold.

Dazed_and_C0nfused

HappyHarry said:

Dazed_and_C0nfused said:

HappyHarry said:

If the OP were to donate their state pension income to a registered charity then they could avoid a lot of the angst and reduce their tax liability.

It wouldn't though.

As a basic rate payer the charity would be able to claim the basic rate tax credit but the op would not save any personal income tax.

They would also have a nice warm glow from inside, which might help make up for the loss of the Winter Fuel Allowance!

The OP is complaining that they are paying higher rate tax on some of their income due to the state pension. Can they not claim back the difference between higher rate and basic rate on their contributions - for the bit that falls in to the higher rate tax bracket at least?

If they are liable to higher rate tax then yes, Gift Aid donations would save them some tax.

But the op's second post on this thread started with the comment below so it's still not clear if they are actually a higher rate payer or not.

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

HappyHarry

Dazed_and_C0nfused said:

HappyHarry said:

Dazed_and_C0nfused said:

HappyHarry said:

If the OP were to donate their state pension income to a registered charity then they could avoid a lot of the angst and reduce their tax liability.

It wouldn't though.

As a basic rate payer the charity would be able to claim the basic rate tax credit but the op would not save any personal income tax.

They would also have a nice warm glow from inside, which might help make up for the loss of the Winter Fuel Allowance!

The OP is complaining that they are paying higher rate tax on some of their income due to the state pension. Can they not claim back the difference between higher rate and basic rate on their contributions - for the bit that falls in to the higher rate tax bracket at least?

If they are liable to higher rate tax then yes, Gift Aid donations would save them some tax.

But the op's second post on this thread started with the comment below so it's still not clear if they are actually a higher rate payer or not.

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

I must admit I read it differently, in that the OP had £39,000 private pension and the state pension then pushed this into HRT. The joys of dealing with partial information!

Dazed_and_C0nfused

HappyHarry said:

Dazed_and_C0nfused said:

HappyHarry said:

Dazed_and_C0nfused said:

HappyHarry said:

If the OP were to donate their state pension income to a registered charity then they could avoid a lot of the angst and reduce their tax liability.

It wouldn't though.

As a basic rate payer the charity would be able to claim the basic rate tax credit but the op would not save any personal income tax.

They would also have a nice warm glow from inside, which might help make up for the loss of the Winter Fuel Allowance!

The OP is complaining that they are paying higher rate tax on some of their income due to the state pension. Can they not claim back the difference between higher rate and basic rate on their contributions - for the bit that falls in to the higher rate tax bracket at least?

If they are liable to higher rate tax then yes, Gift Aid donations would save them some tax.

But the op's second post on this thread started with the comment below so it's still not clear if they are actually a higher rate payer or not.

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

I must admit I read it differently, in that the OP had £39,000 private pension and the state pension then pushed this into HRT. The joys of dealing with partial information!

That could well be the case.

But if they retired (reached SP age) in 2015 and the £39k is a contracted out company pension their State Pension could easily be more like £9k, so still not higher rate.

But as you say, we only seem to have part of the story at the moment.