Taxing of State Pension

KevinG

Not sure whether this is the right forum but I had to get this off my chest. I did my SA Tax Return online and reported the amount of State Pension I had received during the tax year (my pension started during 2023/24). I knew I would owe tax due to bank interest and when I submitted the return the figure owing agreed exactly with what I expected. But the amount they showed I owed was £105 higher and when I received the calculation in the post, sure enough the pension figure (including my company pension) was £525 higher. After a long conversation on the phone it was established that the discrepancy was in the State Pension part and the reason for this is that they take the weekly amount and multiply it by the number of weeks I was entitled to it during the year (21, as it happens) and use that figure, irrespective of whether I had actually received the money during the tax year. (They actually rounded up the number of pounds, which they shouldn't do, but that's only cost me 25p.) This is madness! Surely it's far simpler to use the actual payments made. This money is now lost forever as in future years I will be taxed on 52 or 53 weeks pension, irrespective of what I receive and declare on the Tax Return. Stupid system.

Dazed_and_C0nfused

KevinG said:

Not sure whether this is the right forum but I had to get this off my chest. I did my SA Tax Return online and reported the amount of State Pension I had received during the tax year (my pension started during 2023/24). I knew I would owe tax due to bank interest and when I submitted the return the figure owing agreed exactly with what I expected. But the amount they showed I owed was £105 higher and when I received the calculation in the post, sure enough the pension figure (including my company pension) was £525 higher. After a long conversation on the phone it was established that the discrepancy was in the State Pension part and the reason for this is that they take the weekly amount and multiply it by the number of weeks I was entitled to it during the year (21, as it happens) and use that figure, irrespective of whether I had actually received the money during the tax year. (They actually rounded up the number of pounds, which they shouldn't do, but that's only cost me 25p.) This is madness! Surely it's far simpler to use the actual payments made. This money is now lost forever as in future years I will be taxed on 52 or 53 weeks pension, irrespective of what I receive and declare on the Tax Return. Stupid system.

What State Pension you received is totally irrelevant.

It's the entitlement amount that is taxable. Which in this case could have been rounded down to exactly 21 weeks, in your favour.

https://www.litrg.org.uk/pensions/state-pension/tax-state-pension#:~:text=The state pension is taxed on an accruals basis.,below: Taxable state pension payments.

KevinG

Dazed_and_C0nfused said:

KevinG said:

Not sure whether this is the right forum but I had to get this off my chest. I did my SA Tax Return online and reported the amount of State Pension I had received during the tax year (my pension started during 2023/24). I knew I would owe tax due to bank interest and when I submitted the return the figure owing agreed exactly with what I expected. But the amount they showed I owed was £105 higher and when I received the calculation in the post, sure enough the pension figure (including my company pension) was £525 higher. After a long conversation on the phone it was established that the discrepancy was in the State Pension part and the reason for this is that they take the weekly amount and multiply it by the number of weeks I was entitled to it during the year (21, as it happens) and use that figure, irrespective of whether I had actually received the money during the tax year. (They actually rounded up the number of pounds, which they shouldn't do, but that's only cost me 25p.) This is madness! Surely it's far simpler to use the actual payments made. This money is now lost forever as in future years I will be taxed on 52 or 53 weeks pension, irrespective of what I receive and declare on the Tax Return. Stupid system.

What State Pension you received is totally irrelevant.

It's the entitlement amount that is taxable. Which in this case could have been rounded down to exactly 21 weeks, in your favour.

https://www.litrg.org.uk/pensions/state-pension/tax-state-pension#:~:text=The state pension is taxed on an accruals basis.,below: Taxable state pension payments.

You're right, that explains it, but it doesn't stop it being uterly stupid and in no way was it "in my favour." Income should be taxed based on when you receive it, like everything else. 

Marcon

KevinG said:

Not sure whether this is the right forum but I had to get this off my chest. I did my SA Tax Return online and reported the amount of State Pension I had received during the tax year (my pension started during 2023/24). I knew I would owe tax due to bank interest and when I submitted the return the figure owing agreed exactly with what I expected. But the amount they showed I owed was £105 higher and when I received the calculation in the post, sure enough the pension figure (including my company pension) was £525 higher. After a long conversation on the phone it was established that the discrepancy was in the State Pension part and the reason for this is that they take the weekly amount and multiply it by the number of weeks I was entitled to it during the year (21, as it happens) and use that figure, irrespective of whether I had actually received the money during the tax year. (They actually rounded up the number of pounds, which they shouldn't do, but that's only cost me 25p.) This is madness! Surely it's far simpler to use the actual payments made. 

Not really. You have the option of having your state pension paid weekly, fortnightly or (edited!) four-weekly (and yes, you can change the interval once it's in payment), so it would actually be far harder to change the whole system to cater for tax on receipt rather than the current (perfectly sensible) 'entitlement' basis.

KevinG said:

This money is now lost forever as in future years I will be taxed on 52 or 53 weeks pension, irrespective of what I receive and declare on the Tax Return. Stupid system.

Don't understand the point you're making. If you've already been taxed on the 'extra' £525 then you won't be taxed on it again, so I can't see what money is now 'lost forever'?

KevinG

Marcon said:

KevinG said:

Not sure whether this is the right forum but I had to get this off my chest. I did my SA Tax Return online and reported the amount of State Pension I had received during the tax year (my pension started during 2023/24). I knew I would owe tax due to bank interest and when I submitted the return the figure owing agreed exactly with what I expected. But the amount they showed I owed was £105 higher and when I received the calculation in the post, sure enough the pension figure (including my company pension) was £525 higher. After a long conversation on the phone it was established that the discrepancy was in the State Pension part and the reason for this is that they take the weekly amount and multiply it by the number of weeks I was entitled to it during the year (21, as it happens) and use that figure, irrespective of whether I had actually received the money during the tax year. (They actually rounded up the number of pounds, which they shouldn't do, but that's only cost me 25p.) This is madness! Surely it's far simpler to use the actual payments made. 

Not really. You have the option of having your state pension paid weekly, fortnightly or monthly (and yes, you can change the interval once it's in payment), so it would actually be far harder to change the whole system to cater for tax on receipt rather than the current (perfectly sensible) 'entitlement' basis.

KevinG said:

This money is now lost forever as in future years I will be taxed on 52 or 53 weeks pension, irrespective of what I receive and declare on the Tax Return. Stupid system.

Don't understand the point you're making. If you've already been taxed on the 'extra' £525 then you won't be taxed on it again, so I can't see what money is now 'lost forever'?

I had no idea I could choose how often it was paid, I certainly wasn't given the option. We'll have to differ on how sensible it is, to me it is simpler to base it on payments actually made by the DWP. I take your point about the "extra" tax, in the long run it makes no difference. 

p00hsticks

Marcon said:

Not really. You have the option of having your state pension paid weekly, fortnightly or monthly (and yes, you can change the interval once it's in payment)

Being pedantic (but important as the subject comes up quite a bit on this board) it's 'weekly, fortnightly or four-weekly', NOT 'monthly'. 

double_dutchy

When I was working I was paid four-weekly. That meant there were usually 13 paydays in a tax year, but occasionally (every 20 years or so), there would be 14 paydays in a tax year, which could lead to you paying a substantial amount more tax one month (although, in our case, the tax code was changed for the following year to spread it out).

This method of taxation at least avoids those "month 14" (or "week 53") type problems

Dazed_and_C0nfused

p00hsticks said:

Marcon said:

Not really. You have the option of having your state pension paid weekly, fortnightly or monthly (and yes, you can change the interval once it's in payment)

Being pedantic (but important as the subject comes up quite a bit on this board) it's 'weekly, fortnightly or four-weekly', NOT 'monthly'. 

True.  Unfortunately the State Pension forecast details available on gov.uk don't help with this as they provide a monthly value despite this not being something you can actually get.

Marcon

Dazed_and_C0nfused said:

p00hsticks said:

Marcon said:

Not really. You have the option of having your state pension paid weekly, fortnightly or monthly (and yes, you can change the interval once it's in payment)

Being pedantic (but important as the subject comes up quite a bit on this board) it's 'weekly, fortnightly or four-weekly', NOT 'monthly'. 

True.  Unfortunately the State Pension forecast details available on gov.uk don't help with this as they provide a monthly value despite this not being something you can actually get.

Thanks both - slip of the brain cells, and have edited!

Albermarle

KevinG said:

Marcon said:

KevinG said:

Not sure whether this is the right forum but I had to get this off my chest. I did my SA Tax Return online and reported the amount of State Pension I had received during the tax year (my pension started during 2023/24). I knew I would owe tax due to bank interest and when I submitted the return the figure owing agreed exactly with what I expected. But the amount they showed I owed was £105 higher and when I received the calculation in the post, sure enough the pension figure (including my company pension) was £525 higher. After a long conversation on the phone it was established that the discrepancy was in the State Pension part and the reason for this is that they take the weekly amount and multiply it by the number of weeks I was entitled to it during the year (21, as it happens) and use that figure, irrespective of whether I had actually received the money during the tax year. (They actually rounded up the number of pounds, which they shouldn't do, but that's only cost me 25p.) This is madness! Surely it's far simpler to use the actual payments made. 

Not really. You have the option of having your state pension paid weekly, fortnightly or monthly (and yes, you can change the interval once it's in payment), so it would actually be far harder to change the whole system to cater for tax on receipt rather than the current (perfectly sensible) 'entitlement' basis.

KevinG said:

This money is now lost forever as in future years I will be taxed on 52 or 53 weeks pension, irrespective of what I receive and declare on the Tax Return. Stupid system.

Don't understand the point you're making. If you've already been taxed on the 'extra' £525 then you won't be taxed on it again, so I can't see what money is now 'lost forever'?

I had no idea I could choose how often it was paid, I certainly wasn't given the option. We'll have to differ on how sensible it is, to me it is simpler to base it on payments actually made by the DWP. I take your point about the "extra" tax, in the long run it makes no difference. 

I have recently been invited to apply for my state pension. I was offered the choice of different payment times.

Stubod

...just applied for mine, no option other than 4 weekly....after several phonecalls and an age waiting, finally got it changed to weekly. 

I am suprised they don't give you an online option to do this???