Widowed Basic State Pension pushed into paying tax

Dazed_and_C0nfused

solidpro said:

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

So the only tax actually payable relates entirely to the State Pension.

You could explain to her that once the £235.20 is paid in January 2025 the next time she should have any tax to pay will be 12 months later in January 2026.

But that's likely to be approaching double the 2023-24 bill.  £460 is probably a more realistic figure for 2024-25 

badmemory

Totally agree with Dazed&confused (who rarely is except when I don't explain myself properly).  But do check that state pension figure.  If you have sight of her state pension notification letter it gives the effective date of the rise which usually comes in the second week of the tax year.  Which is where the one week at the old rate comes from then 51 at the new rate.  It is only a couple of pounds but if your calculations were out they would challenge you.  I will be honest in that I don't always bother putting it right, sometimes life just seems to short.  But it is my choice not to put them right & I don't see why others shouldn't also know when they get it wrong.  Tax is paid on state pension when it is accrued not when it is paid, if paid 4 weekly that is.

Jami74

solidpro said:

 I think the only luxury is Virgin media. 

Check what she's currently paying and getting/using. Found out recently when a relative was in hospital for 3 months that they were paying £170 a month. For broadband and watching a bit of TV. After a conversation on the phone it dropped to about £40 a month.

Sarahspangles

solidpro said:

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. 

Also check she is getting the correct Council Tax discounts just in case the spiders ate that letter.

cloud_dog

Might she be entitled to Attendance Allowance?

Flugelhorn

solidpro said:

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. 

I guess management charges for the flat could add a bit 

Don't worry - these women are a specific variety - mother claimed "I never pay tax" .. until she did ... 40p. Never heard the end of it, she was on the phone to HMRC for hours. She had SP, NHS pension, late husband's occupational - so doing alright for "I never pay tax"  but it was a few years back 

Can totally understand her ignoring the letter - they just can't believe it

solidpro

Dazed_and_C0nfused said:

But that's likely to be approaching double the 2023-24 bill.  £460 is probably a more realistic figure for 2024-25 

Ok, good heads up. How come it's going up?

solidpro

We've done all the checking into pension credits with the benefits that go with it and it's a bust. She is way over. She does get single occupancy discount on the council tax. She doesn't pay ground rent - infact just into a shared annual building's insurance. We're going to go through whatever bank statements we can find later, add up the average monthly outgoings and compare to the pension and see what the difference is. No eggs or bread for me to eat so it isn't going on groceries! Off to the co-op for me!

Dazed_and_C0nfused

solidpro said:

Dazed_and_C0nfused said:

But that's likely to be approaching double the 2023-24 bill.  £460 is probably a more realistic figure for 2024-25 

Ok, good heads up. How come it's going up?

Because the State Pension is currently increased each April using the "triple lock" rules.  This means State Pension recipients gets the best of either,

2.5% or
The CPI rate from the previous September or
The average earnings increase from the previous July

For April 2024 this was the average earnings figure, 8.5%.

But the Personal Allowance remained frozen at £12,570 so all the increase is effectively going to be taxed.  And the Personal Allowance is expected to remain that amount for a few years to come.

From April 2025 the triple lock increase is expected to be 4.1% though so the 2025-26 bill could hit £575.

Two other points, she won't get exactly 8.5% or 4.1% because some elements of the old State Pension have different rates applied.  But the triple lock figure is a good guide.

And finally, if she mentions getting the State Pension monthly just ignore her, you can't be paid the State Pension monthly, it's weekly or 4 weekly.  So if the latter 13 payments a year.

LHW99

Also check there are no unrecognised DDs / SOs on her account. Sometimes utility / broadband providers (and magazines etc) forget / dont cancel subscriptions and people end up paying for years for something they cancelled.

Also check she hasn't been sold a bundle that duplicates something else - eg a phone deal that includes mobile, and a broadband deal that also does (especially if she doesn't use one).

Parents-in law were paying a couple of hundred a month for accumulated insurance policies on water, gas, electrical appliances that c/should have been saved on.