STATE PENSION AND INCOME TAX

NOWOLD

If the state pension goes above 4.4% in April 2026 and the tax threshold of 12570 is not increased than it will become liable for income tax and for those without any other taxable income such as a private pension then those just getting state pension will receive a HMRC tax bill at the end of the financial year as HMRC have stated they cannot tax the state pension at source

That is what I have been informed so is that correct?

Hoenir

Yes it is. 

Dazed_and_C0nfused

Yes.  It already happens for plenty of people, nothing new at all.

The tax would be payable on 31 January after the end of the tax year (assuming HMRC issue the Simple Assessment calculation at least 3 months before then).

Marcon

NOWOLD said:

If the state pension goes above 4.4% in April 2026 and the tax threshold of 12570 is not increased than it will become liable for income tax and for those without any other taxable income such as a private pension then those just getting state pension will receive a HMRC tax bill at the end of the financial year as HMRC have stated they cannot tax the state pension at source

That is what I have been informed so is that correct?

Yes. https://www.litrg.org.uk/pensions/state-pension/tax-state-pension/how-tax-collected-state-pension

molerat

It is definitely going to be over the PA for 27-28 whatever happens and as the PA is not going to increase until 28-29 it looks likely to stay that way.  This is going to increase HMRC workload with the number of "enquiries" due the amount of people being brought into paying tax and K codes being issued to just about every pensioner with another income stream.

Robin9

@Nowold -  you are correct. Silly isn't

One way would be a slight adjustment to the Basic Rate to equal the min state pension (won't happen -  too logical)

eskbanker

Robin9 said:

@Nowold -  you are correct. Silly isn't

One way would be a slight adjustment to the Basic Rate to equal the min state pension (won't happen -  too logical)

It's not logical at all - even if the threshold was reset to the full (not 'min'!) new state pension, there are many receiving more than that, by virtue of receiving payments based on the old regime....

Sarahspangles

This scenario became likely for a majority of pensioners once the transition to New State Pension started in 2016. The roll out of Simple Assessment started the following year, to prevent pensioners having to complete Self Assessment returns to pay the tax.

Last year, 140,000 pensioners whose only income is their State Pension were issued with a Simple Assessment. The figure would be far higher if so many pensioners didn’t have at least some private pension meaning that tax can be collected via PAYE.

NOWOLD

Does anyone know if state only pensioners will be informed of this situation before it occurs?

eskbanker

NOWOLD said:

Does anyone know if state only pensioners will be informed of this situation before it occurs?

Seems unlikely IMHO - every year since the threshold was frozen (and even before that too), there will have been a number of state pensioners who become liable to pay income tax when their SP increased from below to above it, so this is nothing new, although the number of people involved is likely to be higher next year.

artyboy

At some point I'm sure there will be political capital made of the 'fact' that being over the threshold means that the triple-lock guarantee has been devalued by 20%...