Tax and State Pension 25/26

peterhjohnson

I've just got a letter from DWP telling me my State Pension from April.
As I get slightly more than the headline rate,  my SP will exceed £12570 for the first time making me liable for a small amount of tax
I also have a SIPP from which I've been taking small amounts in recent years to give me exactly £12570 
Reading https://www.gov.uk/tax-on-pension/how-your-tax-is-paid which tells me:

If you get the State Pension and a private pension

Your pension provider will usually take off any tax you owe before they pay you. They’ll also take off any tax you owe on your State Pension.

... which seems fair enough, except that I was thinking of taking nothing from the SIPP in 25/6. So, although, HMRC and my SIPP provider have PAYE, notice of coding, etc set up, it's not going to kick in and sort out my small tax liability.

The page also says:

If the State Pension is your only income 

If you go over your Personal Allowance and you have tax to pay, HMRC will send you a Simple Assessment tax bill. This will tell you how much you owe and how to pay it

HMRC will not know at the beginning of the tax year that State Pension is my only income unless I tell them I plan not to use the SIPP and who knows, I might change my mind later? So will they wait until the end of 25/6, notice that I haven't paid and get upset?

I don't want them upset and I really don't want to go in to Self Assessment as I got out of that about 10 years ago and it was such a nightmare that I really want to avoid it. Especially as once the Personal Allowance starts to rise again, I won't be liable to pay tax anymore?

Thanks!

Flugelhorn

I think they send you a simple assessment at some point in the year and that will indicate if you need to pay - also gives you the chance to confirm that it is right

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

Personal allowances aren't going anywhere for the time being 

I do S-A for private pension, interest and state pension - only takes a few minutes (but doesn't sound like you will need to do it anyway) 

eskbanker

peterhjohnson said:

HMRC will not know at the beginning of the tax year that State Pension is my only income unless I tell them I plan not to use the SIPP and who knows, I might change my mind later? So will they wait until the end of 25/6, notice that I haven't paid and get upset?

No, they'll wait until (after) the end of 25/26, and if at that point you have a tax liability, they'll notify you of this in late 2026 and arrange payment thereafter - no upset (or self-assessment) involved, it's perfectly routine admin, nothing to be concerned about!

peterhjohnson

Thanks for the replies. I'm glad I'll escape Self Assessment. I'm sure some people find SA easy but when I had to do it, I found it very stressful.
> Personal allowances aren't going anywhere for the time being 
Rachel Reeves announced that "personal tax thresholds will now be uprated in line with inflation again from 2028-29" :-:smile:

eskbanker

peterhjohnson said:

Especially as once the Personal Allowance starts to rise again, I won't be liable to pay tax anymore?

peterhjohnson said:

> Personal allowances aren't going anywhere for the time being 
Rachel Reeves announced that "personal tax thresholds will now be uprated in line with inflation again from 2028-29"

Exactly, going nowhere for the time being.

If your SP exceeds the personal allowance in 2025/26, that head start plus another three years of triple-lock increases should keep it well above the personal allowance ad infinitum....

Aretnap

peterhjohnson said:

> Personal allowances aren't going anywhere for the time being 
Rachel Reeves announced that "personal tax thresholds will now be uprated in line with inflation again from 2028-29" :-:smile:

Personal allowance will rise with inflation from 2028 (possibly, maybe, assuming nothing bad happens between now and then).

Triple locked state pension will continue to rise by at least inflation, and possibly more, from next year.

Your state pension is going to be above the personal allowance for the foreseeable future. 

(This is on the whole a good thing - it is better to get an increase and pay tax on it than not get an increase - though for the first year or two at least hassle of dealing with tax might feel like more effort than the increase is worth.)

Sarahspangles

From the individual’s point of view Simple Assessment just means you receive a PA302 over the summer after the end of the tax year. Similar timing to the P800 that PAYE taxpayers receive if they haven’t paid the right amount of tax. You check it, and there’s then an interval before it has to be paid. 

Triumph13

Or you could just start taking an income from your SIPP, because otherwise what is it for?  

Flugelhorn

peterhjohnson said:

Thanks for the replies. I'm glad I'll escape Self Assessment. I'm sure some people find SA easy but when I had to do it, I found it very stressful.
> Personal allowances aren't going anywhere for the time being 
Rachel Reeves announced that "personal tax thresholds will now be uprated in line with inflation again from 2028-29" :-:smile:

actually  even then some of the time the pension will go up faster than the personal allowance and also has a few years head start

peterhjohnson

Triumph13 said:

Or you could just start taking an income from your SIPP, because otherwise what is it for?  

I could but I don't need to yet. I have tax-free income from a Stocks and Shares ISA and also interest on cash deposits which come under the Personal Savings Allowance and Starting Rate for Savings. Later on, lower interest rates, higher inflation and larger expenses could see me drawing on the SIPP which I've currently configured for (cautious) growth and zero income.

where_are_we

If you have not already deferred your state pension, are in good health, have other means of funding your lifestyle, you could consider deferring your state pension for a year and in that year make very large UPFLS to get you up to the £12570. You will not pay any tax on this withdrawal. However you don`t get your state pension that year though you will get a 5.8% uplift in your remaining years and it depends on your longevity whether you will retrieve your lost year.