Paying Tax on Old Pension

Bentnail

HI
My Old state pension for 2025 is £231.63 and I get Pension Credit(Savings element) 0f £15.49
This gives a Weekly Total of £247.12 which is £12,840.24 per Year
But the Tax allowance has not risen so is at £12,750
So am I supposed to pay Tax on that £280.24 p ? Surely Not?
Grateful for any Input
Cheers
Dave

Bentnail

Sorry Tax Allowance is £12,570

DE_612183

Pension Credit is Tax Free.

Bentnail

Cheers much obliged 

Dazed_and_C0nfused

Bentnail said:

HI
My Old state pension for 2025 is £231.63 and I get Pension Credit(Savings element) 0f £15.49
This gives a Weekly Total of £247.12 which is £12,840.24 per Year
But the Tax allowance has not risen so is at £12,750
So am I supposed to pay Tax on that £280.24 p ? Surely Not?
Grateful for any Input
Cheers
Dave

Pension credit isn't taxable but if (when) your State Pension becomes more than your Personal Allowance then yes, you would have to pay tax on it.

Just like someone earning more than their Personal Allowance would.  The only difference is how you pay the tax.

Your State Pension for 2025-26 is likely going to be ~£240/week (£12,480).  So by 2026-27 you can expect to have tax to pay.

The above assumes you haven't applied for Marriage Allowance.

Cobbler_tone

I'm assuming that if/when the state pension exceeds the standard personal allowance (and when it's the only source of income someone has) they are going to have to tax it at source....unless they raise the limit for those only receiving this income. It'll have to be automated.

Dazed_and_C0nfused

Cobbler_tone said:

I'm assuming that if/when the state pension exceeds the standard personal allowance (and when it's the only source of income someone has) they are going to have to tax it at source....unless they raise the limit for those only receiving this income. It'll have to be automated.

I suspect DWP will be overjoyed to have to do that!

In reality I bet more people just end up getting a Simple Assessment calculation from HMRC and have to pay it direct to HMRC

Which is money in their pocket for between 9 and 21 months longer than if tax was deducted at source.  Sometime be careful what you wish for 😉

DE_612183

I think the standard state pension will end up being the same as the tax free allowance

p00hsticks

Cobbler_tone said:

I'm assuming that if/when the state pension exceeds the standard personal allowance (and when it's the only source of income someone has) they are going to have to tax it at source....unless they raise the limit for those only receiving this income. It'll have to be automated.

There is no way DWP systems could or should do this - there are those out there whose state pension already exceeds their tax allowance and the mechanism is in place to handle it. 

DWP simply report payments made to HMRC and let HMRC decide what tax if any is owed. HMRC will then either adjust the tax code applied to any other income such as private pensions or write to the person at the end of the year advising them how much they owe and how to pay it. 

Sarahspangles

Cobbler_tone said:

I'm assuming that if/when the state pension exceeds the standard personal allowance (and when it's the only source of income someone has) they are going to have to tax it at source....unless they raise the limit for those only receiving this income. It'll have to be automated.

Simple Assessment was introduced in 2017, specifically designed for pensioners in this scenario, and PAYE employees whose underpaid tax couldn’t be recovered through their payroll. Pensioners are being moved across in batches, starting with new pensioners first.

https://www.gov.uk/government/publications/issue-briefing-simple-assessment-ending-the-tax-return/simple-assessment-ending-the-tax-return

Cobbler_tone

Sarahspangles said:

Cobbler_tone said:

I'm assuming that if/when the state pension exceeds the standard personal allowance (and when it's the only source of income someone has) they are going to have to tax it at source....unless they raise the limit for those only receiving this income. It'll have to be automated.

Simple Assessment was introduced in 2017, specifically designed for pensioners in this scenario, and PAYE employees whose underpaid tax couldn’t be recovered through their payroll. Pensioners are being moved across in batches, starting with new pensioners first.

https://www.gov.uk/government/publications/issue-briefing-simple-assessment-ending-the-tax-return/simple-assessment-ending-the-tax-return

I’m sure thousands more pensioners struggling on a state pension will love getting a small tax bill through the post.
IMO they will do something to isolate the state pension from taxation for those without other income. It’s 2025, I’m sure the tech exists. A couple of years for that to pan out.

As an aside it made me chuckle to see the petition to raise the tax threshold to £20k…..