STATE PENSION AND INCOME TAX

Cobbler_tone

I think some people are giving the HMRC pre-planning department too much credit! They are clearly struggling judging by some of the delays experienced. It is well publicised that there
customer service is poor and they are experiencing their own cost cutting pressures.
The extra work generated isn’t going to help improve things.

Dazed_and_C0nfused

Fink_Nottle said:

eskbanker said:

There's unlikely to be anyone brought into self-assessment by this?  HMRC will continue to use the simple assessment process explained earlier....

Yes, thank you - I missed that. Or perhaps I just couldn't believe that I'd read that HMRC were claiming that something they were doing was simple...

And it still needs costing for all the extra people it will catch.

This has been happening since before HMRC existed.

Inland Revenue used to deal with it 30+ years ago, albeit in smaller number.

I think it was known as Direct Collection, or a DC Assessment.

sheramber

Dazed_and_C0nfused said:

Fink_Nottle said:

eskbanker said:

There's unlikely to be anyone brought into self-assessment by this?  HMRC will continue to use the simple assessment process explained earlier....

Yes, thank you - I missed that. Or perhaps I just couldn't believe that I'd read that HMRC were claiming that something they were doing was simple...

And it still needs costing for all the extra people it will catch.

This has been happening since before HMRC existed.

Inland Revenue used to deal with it 30+ years ago, albeit in smaller number.

I think it was known as Direct Collection, or a DC Assessment.

And all worked manually. No computers to work it for you. 

sheramber

Fink_Nottle said:

eskbanker said:

There's unlikely to be anyone brought into self-assessment by this?  HMRC will continue to use the simple assessment process explained earlier....

Yes, thank you - I missed that. Or perhaps I just couldn't believe that I'd read that HMRC were claiming that something they were doing was simple...

And it still needs costing for all the extra people it will catch.

Less those who have died. 

hugheskevi

A few stats worth considering for perspective:

• Of the 12.7 million receiving a State Pension, only 4.3 million are receiving the New State Pension.
• 2.2 million already receive at least £13,000 p/a of State Pension and so will probably pay tax despite it being possible that their only source of income is State Pension
• 5.6 million receive between £10,400 and £13,000 which contains most of the group that may start to pay income tax as a result of Triple Lock and frozen Personal Allowance. Of these 5.6 million, half (2.8m) receive the new State Pension and half the old State Pension.
• Annual increases to the new State Pension are forecast to be about £650 to £700 p/a. If the increase ends up all being taxable whilst previously an individual was a non-taxpayer, the amount of tax paid would be £140 for the entire year.
• HMRC permits up to £3,600 to be put into a pension without any earnings. Contributing this amount and withdrawing it and paying basic rate tax would result in a gain of £180 per year.
• Winter Fuel payments were £200 or £300 per household

Hoenir

Cobbler_tone said:

I think some people are giving the HMRC pre-planning department too much credit! They are clearly struggling judging by some of the delays experienced. It is well publicised that there
customer service is poor and they are experiencing their own cost cutting pressures.

When people submit their tax return on the 6th April and ring on the 8th asking where their tax refund is. Should be no great surprise that productivity is low. If people were simply left to get on with their jobs far more would be achieved quicker.

The transition to online personal tax accounts is a long term project. That will be well rewarded. 

eskbanker

Cobbler_tone said:

I think some people are giving the HMRC pre-planning department too much credit! They are clearly struggling judging by some of the delays experienced. It is well publicised that there
customer service is poor and they are experiencing their own cost cutting pressures.
The extra work generated isn’t going to help improve things.

I don't know who you're referring to by 'some people' giving HMRC too much credit but if it was my remark about them knowing what's coming, that wasn't making any comment about their resourcing (lack of which is hardly a secret) but was simply in response to suggestions that this is all going to need to be costed, as if it's a surprise....

Cobbler_tone

eskbanker said:

Cobbler_tone said:

I think some people are giving the HMRC pre-planning department too much credit! They are clearly struggling judging by some of the delays experienced. It is well publicised that there
customer service is poor and they are experiencing their own cost cutting pressures.
The extra work generated isn’t going to help improve things.

I don't know who you're referring to by 'some people' giving HMRC too much credit but if it was my remark about them knowing what's coming, that wasn't making any comment about their resourcing (lack of which is hardly a secret) but was simply in response to suggestions that this is all going to need to be costed, as if it's a surprise....

Agreed, no surprise.
I feel sorry for the old and more vulnerable. It'll open up a wider window of opportunity for the HMRC scammers to lure people in. 

Fink_Nottle

eskbanker said:

I don't know who you're referring to by 'some people' giving HMRC too much credit but if it was my remark about them knowing what's coming, that wasn't making any comment about their resourcing (lack of which is hardly a secret) but was simply in response to suggestions that this is all going to need to be costed, as if it's a surprise....

I'll try to be careful not to get political here, but the last government has repeatedly been accused by the new government of announcing or costing things, but then not transferring them into budgets, leading to massive in-year shortfalls. (For balance, I am not optimistic that this trend will abate). Awareness of a forthcoming issue is pointless unless it leads to meaningful action, and that is my fear for HMRC.

HMRC / Treasury may decide to accept that more resource is needed, and fund the hiring and training of more people, but if the next SP rise is (let's say) the 4.4% mentioned by the OP, the tax collected could be very much less than the cost of collecting it. Even at the projected value of £140 per head, I'd be curious to know if that breaks even.

OR (and getting back to how it may affect actual pensioners) it could be an opportunity to re-think an overly complex situation and avoid giving (according to the stats quoted by @hugheskevi ) potentially millions of ordinary people, a good few of them likely vulnerable, an unnecessary headache. I haven't seen much coverage from charities representing the elderly on this so far, but to be fair I guess they've had a lot of other stuff on their plate.

eskbanker

Fink_Nottle said:

eskbanker said:

I don't know who you're referring to by 'some people' giving HMRC too much credit but if it was my remark about them knowing what's coming, that wasn't making any comment about their resourcing (lack of which is hardly a secret) but was simply in response to suggestions that this is all going to need to be costed, as if it's a surprise....

I'll try to be careful not to get political here, but the last government has repeatedly been accused by the new government of announcing or costing things, but then not transferring them into budgets, leading to massive in-year shortfalls. (For balance, I am not optimistic that this trend will abate). Awareness of a forthcoming issue is pointless unless it leads to meaningful action, and that is my fear for HMRC.

HMRC / Treasury may decide to accept that more resource is needed, and fund the hiring and training of more people, but if the next SP rise is (let's say) the 4.4% mentioned by the OP, the tax collected could be very much less than the cost of collecting it. Even at the projected value of £140 per head, I'd be curious to know if that breaks even.

OR (and getting back to how it may affect actual pensioners) it could be an opportunity to re-think an overly complex situation and avoid giving (according to the stats quoted by @hugheskevi ) potentially millions of ordinary people, a good few of them likely vulnerable, an unnecessary headache. I haven't seen much coverage from charities representing the elderly on this so far, but to be fair I guess they've had a lot of other stuff on their plate.

Yes, I can't say for certain that this is definitely fully budgeted in HMRC's plans, but the statistics quoted earlier emphasise that this isn't a new issue as such, in that there are millions of people whose state pensions already exceed the tax threshold.  Granted, we don't know how many of those also have PAYE income via which tax can be paid automatically, but the fact remains that the full new SP exceeding the threshold will simply increase the size of the affected population rather than creating a new problem as such, i.e. it's just a matter of degree, in the same way that there were more savers newly liable to pay income tax when interest rates spiked.