State Pension and Personal allowance

Dazed_and_C0nfused

badmemory said:

The problem is that in dealing with increasingly elderly people that the simple assessment as in my case has never been correct.  It isn't much out but the DWP does not notify HMRC of the correct state pension figure & you can't get much more basic than that.  I always worried that as I aged doing self assessment would become a problem.  So I thought simple assessment would be a good thing.  Many years ago I worked doing figures (before computers & even electronic calculators) it was always acknowledged then that calculating figures is a lot easier than checking figures.  How many have paid too much tax using simple assessment just because "they" said so.

Just to give an idea.  For every £1 the state pension rises in a week a tax paying pensioner using simple assessment will overpay 20p.  Doesn't sound like much.  That also doesn't take into account that when you file self assessment they knock the pennies off (round down) all amounts but with simple assessment they add them all up.  Not much I agree, but why should I pay more tax than someone with the same income.

Who said tax doesn't have to be taxing?

I'm not entirely convinced you fully understand exactly how HMRC tax State Pension.

It is taxed on the accruals basis, not the receipts basis, so what you are paid by DWP during the tax year is irrelevant.

DWP notify HMRC of the rate for the new tax year, the rest is in HMRC's hands.

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye76030

I have seen the odd case where HMRC have used 52 weeks of the new rate in their end of year calculation, when it should have been 51 weeks of the new rate and 1 of the old rate but the tax involved in that has been < £5 so whilst admittedly not ideal it is a small price to pay for the benefit of having the use of the full State Pension until 9 months after the end of the tax year.

Maybe DWP deducting tax at source would be preferable to Simple Assessment for some people but that brings forward payment of (some of) the tax by more than 18 months 😳.

badmemory

In my world the HMRC always use the DWP figure for 52 weeks, they have never used 51 new & 1 old until I have corrected it.  Thank you for clearing that up.  Anything I have read has always just said that the DWP notify HMRC of the payment for the year.

xylophone

They will not want to have to, in the ultimate, take very poor OAPs with SP above the tax threshold and minimal other income to court.

If "very poor" equates to "entitled to Pension Credit" then no single pensioner whose income is currently above the personal 

allowance counts as "very poor".........

Even though on average usage, such a pensioner may be having to spend around  £35 a week on energy costs.... and on a total 

income of (say)  £250 a week that's a lot of money.

Still not eligible for Winter Fuel Payment though.....

Sarahspangles

Dazed_and_C0nfused said:

….how HMRC tax State Pension.

It is taxed on the accruals basis, not the receipts basis, so what you are paid by DWP during the tax year is irrelevant.

DWP notify HMRC of the rate for the new tax year, the rest is in HMRC's hands.

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye76030

Is the approach set out in the internal manual consistent with what HMRC tell pensioners on Simple Assessment?

https://www.gov.uk/government/publications/pensioners-and-tax-communications-materials/simple-assessment-guide-for-pensioners

Information about the State Pension you are due will also be provided to HMRC automatically by DWP.
…..
The State Pension figure shown in the letter is the money you were entitled to receive for the whole tax year. This will be a full 52 weeks’ worth.

If so, is it different from the amount of SP assumed for pensioners on PAYE (i.e. where tax is deducted from a personal pension payment)?

I feel like this issue gets asked about a lot and those answering sometimes don’t understand the Simple Assessment arrangements.

OH is currently in limbo, it’s unclear whether he’s going to be moved off PAYE and he can’t elect to submit a Self Assessment tax return until next year.

Dazed_and_C0nfused

Sarahspangles said:

Dazed_and_C0nfused said:

….how HMRC tax State Pension.

It is taxed on the accruals basis, not the receipts basis, so what you are paid by DWP during the tax year is irrelevant.

DWP notify HMRC of the rate for the new tax year, the rest is in HMRC's hands.

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye76030

Is the approach set out in the internal manual consistent with what HMRC tell pensioners on Simple Assessment?

https://www.gov.uk/government/publications/pensioners-and-tax-communications-materials/simple-assessment-guide-for-pensioners

Information about the State Pension you are due will also be provided to HMRC automatically by DWP.
…..
The State Pension figure shown in the letter is the money you were entitled to receive for the whole tax year. This will be a full 52 weeks’ worth.

If so, is it different from the amount of SP assumed for pensioners on PAYE (i.e. where tax is deducted from a personal pension payment)?

I feel like this issue gets asked about a lot and those answering sometimes don’t understand the Simple Assessment arrangements.

OH is currently in limbo, it’s unclear whether he’s going to be moved off PAYE and he can’t elect to submit a Self Assessment tax return until next year.

It seems like there could be some inconsistencies between tax codes and the final calculation for the year although some people who started receiving State Pension in 2010 or earlier years should be taxed on 52 weeks at the new rate.

BikingBud

xylophone said:

I know that and likely the OP knows that but it does strike me as bizarre when everybody gets on the case of non-doms not paying UK tax, we continue to subsidise non-dom pensioners who similarly do not pay UK tax, yet expect he full benefits of the UK tax payer funded systems, including returning when they need NHS treatment or benefits.

If you know that and suspect the OP knows that then why make the sweeping statement?

With regard to the question of increase/no increase on state pension, the people who have emigrated qualified for their state pensions 

during their working lives. 

 

It seems to me that qualifying included the right to subsequent increases, regardless of which country you chose for your retirement.

I imagine that you would feel rather sour if your occupational pension (assuming you have one) were to be restricted as to 

increases if you emigrated?

I don't know the rules regarding qualifying for NHS treatment  after emigration but in principle why not?

It is a separate discussion but yes perhaps they qualified once upon a time in a place far far away. But why does that historic qualification attract an automatic triple lock increase for life? Especially when pensions are becoming unaffordable and as the emigres are not contributing to the UK economy. Perhaps if the annual triple lock increase was removed for overseas pensioners the funds could be redirected to winter fuel allowance

As sour as all those who are now paying for the pensions of people that have decided to cut and run! 

Because if you want to emigrate do it. But understand what the consequences will be. Ensure you plan and can resource for your future needs accordingly. Don't bleat after the case.

xylophone

they qualified once upon a time in a place far far away.

They qualified here, not in a place far, far away ....

pinnks

And, of course, other than those living in the EU, where the withdrawal agreement preserves the treatment of pensions for those who exercised their EU freedoms into, or out of the UK, (one should expect nothing less), there are very few countries in the world where those receiving UK state pension enjoy the annual increase, i.e. their pensions are frozen at the level they were when the person first received their pension or, if later, left the UK.

Nebulous2

pinnks said:

And, of course, other than those living in the EU, where the withdrawal agreement preserves the treatment of pensions for those who exercised their EU freedoms into, or out of the UK, (one should expect nothing less), there are very few countries in the world where those receiving UK state pension enjoy the annual increase, i.e. their pensions are frozen at the level they were when the person first received their pension or, if later, left the UK.

It's worth remembering that these are bilateral agreements - UK pension increases are dependent on other countries agreeing to increase pensions for their pensioners living here. 

Countries where we pay an annual increase in the State Pension - GOV.UK

Some of the most significant ones (Spain / France / Italy / USA) receive increases. Significant countries that don't are Canada, Australia and New Zealand. 

BikingBud

xylophone said:

they qualified once upon a time in a place far far away.

They qualified here, not in a place far, far away ....

Thanks for your efforts but:

They qualified here and now live in a place far far away.