Widowed Basic State Pension pushed into paying tax

eskbanker

solidpro said:

I overheard the guy from HMRC explaining that a not-insignificant portion of the bill was related to interest (circa £30-£40).

It'll become evident as soon as you see the document, but does that relate to tax on interest or interest on tax (for late payment)?

Dazed_and_C0nfused

badmemory said:

Alright so your MIL is a couple of years older than me and on the basic state pension plus SERPS from her earnings & some inherited from her late husband.  I suspect that what she has there is a simple assessment letter.  Does it have the year 23-24 near the top & PA302 at the bottom?  Stating how much tax she needs to pay by 31 Jan 2025.  So not urgent at the moment.

Some will be items (as D&C said) that are taxable but currently at 0%, such as savings interest.

She/you should check the figures, especially the state pension figures as they seem to normally do 52 x the new rate rather than 51 x new rate plus 1 x old rate.

The op said she's in her late 70's so 52 x the new rate would be correct for some years.

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

xylophone

You say that she is a widow and is 81 years old and that her only income is state pension and  (it seems) a  amount of savings

interest.

Her total state pension is around £13,700 a year.

Of this, £8,814 is the BASIC State Pension.

£4886 is the Additional State Pension.

The ASP can comprise any Graduated Pension/State Earnings Related pension accrued in her own right as well as a proportion of

any Grad/SERPs/S2P accrued by her late husband and inherited by her as his widow.

Ask her if she is willing to show you her statements of increase in SP received over the past three years or so.

How much has she received in total in savings interest over the same period?

It would need to have been substantial for her to have become liable for tax on this.

https://www.gov.uk/apply-tax-free-interest-on-savings

Her pension has been liable to tax since the time it exceeded her Personal Allowance (usually £12,570 per annum).

The State Pension is always paid gross so if she has no other source of taxable income (for example an occupational pension)

from which the tax due can be deducted via tax coding, then HMRC will issue a letter setting out the calculation of tax due  and

the means of payment.

Dazed_and_C0nfused

eskbanker said:

solidpro said:

I overheard the guy from HMRC explaining that a not-insignificant portion of the bill was related to interest (circa £30-£40).

It'll become evident as soon as you see the document, but does that relate to tax on interest or interest on tax (for late payment)?

If it's a Simple Assessment calculation, which it almost certainly is from what's been posted then it's unlikely to be late payment interest.

Although LITRG claim this can be charged I've not known it happen and can't find anything in the HMRC info on gov.uk that indicates they do charge interest.

https://www.litrg.org.uk/tax-nic/how-tax-collected/simple-assessment#5

badmemory

Just to add - in the last 12 years mine have all except for one been 51 x new & 1 x old.

Dazed_and_C0nfused

badmemory said:

Just to add - in the last 12 years mine have all except for one been 51 x new & 1 x old.

You've lost me, in your previous post you put the extract below.  I don't quite see how 1 in 12 becomes "normally" 🤔

She/you should check the figures, especially the state pension figures as they seem to normally do 52 x the new rate rather than 51 x new rate plus 1 x old rate.

MikeJXE

So she is 2 years younger than me and owns her own home 

I rent a 1 bed flat and own a car, I have some savings but not enough to pay tax on 

My pension is a similar amount and I pay tax but I have never asked for help from the kids, more the other way round 

So why is she on the breadline ? 

What does she spend all her money on ? 

Newly_retired

Could she be paying an increased management fee on her leasehold flat, maybe? Or had to contribute towards some work on the building? Increase in insurance? ( buildings, contents, car, life).

Or personal spending? Hairdresser? Charitable giving? Holidays? Been scammed and won’t admit it? Any number of reasons why she may be living above her means.

You need to convince her that if she needs help, she has to provide full information.
Does anyone have Power of Attorney for her?

solidpro

FIREDreamer said:

solidpro said:

Ok I'm never mentioning WASPE or WASPI again.

I was trying to remote work in the spare room and I overhear this conversation my wife is having with HMRC over the phone trying to ascertain whether either a letter or something with their branding on is real. This was the one and only letter we've seen regarding income tax to be paid. I didn't even realise she was getting more than the very base level of maximum state pension until now. It was during that phone call (on speakerphone) I overheard the guy from HMRC explaining that a not-insignificant portion of the bill was related to interest (circa £30-£40). Obviously I'm playing catch up here the whole time because I'm the only person in our house that seems to want to understand or manage personal finance. Another problem we have is that often a letter gets filed in a box which goes under another box in a cupboard protected by spider guards. And so when this one turns up, which is probably for last year, it probably isn't the 'first we've heard of it' but everything is a puzzle to be unpuzzled.

We will try and get her to point out, save and show us the fresh pension breakdown she is likely to get around springtime. We're paying the tax because the conversation about having to pay tax because you're getting more money is just one not worth having. Thanks for all the responses.

Could she have earned £1,200 taxable interest in that tax year? The first £1,000 is not taxed (it has a tax free allowance) but there is 20% tax on the rest and £200 x 20% implies £40 tax due?

Definitely not. She has less than £1000 to her name.

badmemory said:

Alright so your MIL is a couple of years older than me and on the basic state pension plus SERPS from her earnings & some inherited from her late husband.  I suspect that what she has there is a simple assessment letter.  Does it have the year 23-24 near the top & PA302 at the bottom?  Stating how much tax she needs to pay by 31 Jan 2025.  So not urgent at the moment.

Some will be items (as D&C said) that are taxable but currently at 0%, such as savings interest.

She/you should check the figures, especially the state pension figures as they seem to normally do 52 x the new rate rather than 51 x new rate plus 1 x old rate.

Yes, it is a simple assessment tax calculation for 2023-2024 and it does have PA302 at the bottom. It says on page 2 that state pension is £13746.20 and untaxed interest is £34. It says taxable income is £1210.20 (which is £1176 @ basic rate + interest) and so the income tax is £235.20

solidpro

Thanks everyone. She doesn't seem to have a drink, drugs or gambling problem. I think just one woman living on the south coast in a fairly small 2 bed flat (leasehold) costs £13k a year to 'run'. She gave up her car last year. We have replaced the winterfuel allowance for her and we're paying for a new hearing aid (circa £1800! because she's been told she would have to wait 2 years and the one they're offering is bulky and basic). She's got 1 cat, a cleaner who comes in once a month and that's about it. I think the only luxury is Virgin media. I'm not begrudging anyone paying the tax they're due to pay, I just was trying to understand why her pension didn't seem to match what either of the state pensions were and why she was saying she's never had to pay tax before. I am guessing at this point, what I thought happened - her '23 triple lock increase is the one that pushed her over the personal allowance threshold and it's taken 18 months to become nearly due. I didn't know that a husband can (could?) pass on part of their state pension, so I didn't realise where the increased pension was coming from.