State Pension and Personal allowance

JoeCrystal

BikingBud said:

JoeCrystal said:

squirrelpie said:

Sarahspangles said:

However increasing numbers are on Simple Assessment which works more like Self Assessment. Most will get a bill around now for tax on last year’s pension(s) and savings income, and have until the end of Jan to either pay or agree a payment arrangement. This resolves the issue where not enough tax can be taken from the private pension via PAYE to cover the tax due.

Simple assessment seems like a bodge to me. Evidently since it's "too difficult" for DWP to implement taxation of state pension at source, like every other employer or pension provider in the land has to do, HMRC have been leaned on to implement a system to take back the tax after payment instead. My guess is that once the new state pension gets to a level where tax is due on it alone, there will be anoutcry and some other solution will be found.

... But would there be an outcry anyway when your state pension gets slashed by 20% due to the income taxes levied on it?  Maybe DWP just "simply" assume that you are a taxpayer anyway and just hand 20% of your state pension to the HMRC directly, and you can just "reclaim" the tax instead?

It reminds me of what the banks used to do with the interest on the savings! 

Why would anybody's state pension get SLASHED by 20%?

Stay Pension will be marked down as income in the same manner that occurs for other sources. There will be a code adjustment to accommodate the total income, the total tax liability and the apportionment of tax against those sources.

Doesn't seem to be any slashing to me.

You misunderstood my point with my answer to squirrelpie. I am aware how it works with the tax codes. What I am trying to point out is that many people may not view it that way if the State Pension become PAYE as well so thus answered with an over the top comment as predicting people's reactions. 😀 Especially considering the standard of media these days.

pterri

 More and more older people are being looked after by more and more younger people. I know which end of the demographic spectrum I’d like to be today (financially speaking at least)

pterri

pterri said:

 More and more older people are being looked after by more and more younger people. I know which end of the demographic spectrum I’d like to be today (financially speaking at least)

Or do I mean fewer and fewer younger people? Whatever, you get the point. The fact that many people on here are thinking of using a considerable chunk of their pension savings to help their kids afford a home is telling. 

zagfles

german_keeper said:

zagfles said:

german_keeper said:

I never really understand why people think someone on a pension should pay less tax than someone on a similar income working his/her backside off for minimum wage, often with a family to bring up. Does seem to be quite a commonly held opinion though.

Maybe because they've already been taxed on the contributions they've made towards the state pension (ie NI). There's no tax relief on NI contributions. Someone who works their backside off for min wage and pays NI towards the state pension with no tax relief, will then get taxed again when their NI payments get them a state pension, if it exceeds the PA. 

That's why taxing the state pension when it exceeds the PA is controversial and something the govt will look to avoid happening to people on the full NSP. Perhaps though reintroducing a pensioner tax allowance. 

Don't see the relevance of that. Your income is your income at any given point and should be taxed accordingly. That's my opinion and it's as relevant as anyone's.

You said you didn't understand why people have a different opinion to yours. I gave you a reason. 

The relevance is that the money paid in towards the state pension has already been taxed. Like money paid into an ISA, or in insurance premiums. Do you also think insurance payouts, ISA withdrawals etc should be taxed as income?

Flugelhorn

xylophone said:

Many people seem to think that a K tax code is reducing their personal allowance when the fact is the tax code has nothing to do with the personal allowance but is merely a tool to try to collect the correct amount of tax whilst taking account of untaxed at source but otherwise taxable income.

Relative has a K tax code applied to his occupational pension.

He has SP plus occupational pension plus some modest income not taxed at source.

He also has to make payments on account.

https://www.gov.uk/tax-codes/what-your-tax-code-means

I have  K codes - usually with a despairing multi page letter from HMRC that ends with something to the effect of "we'll sort it out in the end by self assessment" - which suits me