STATE PENSION AND INCOME TAX

Cobbler_tone

My savings haven't been taxed (various interest across 6/7 accounts), despite being over the threshold the past 2 years. It's why my perception is that some of the systems and processes are not that slick, no idea if it is resource related. It is not a major saving so thought that might be down to the work involved vs the reward but I am pretty sure that discretion doesn't/shouldn't come into it! P.S. I'm employed and not in the world of self assessments.
If the backlog is that severe, any retrospective tax bill isn't going to break the bank and I'd happily take the adjustment. I've been waiting for the notification.

eskbanker

Cobbler_tone said:

My savings haven't been taxed (various interest across 6/7 accounts), despite being over the threshold the past 2 years. It's why my perception is that some of the systems and processes are not that slick, no idea if it is resource related. It is not a major saving so thought that might be down to the work involved vs the reward but I am pretty sure that discretion doesn't/shouldn't come into it! P.S. I'm employed and not in the world of self assessments.
If the backlog is that severe, any retrospective tax bill isn't going to break the bank and I'd happily take the adjustment. I've been waiting for the notification.

Have you received any P800 assessments from HMRC?  The onus is on you to pay the correct amount of tax, even though you may consider it justifiable not to if you haven't been asked....

molerat

I suspect there's little cost, not answering 2M calls costs the same as not answering 1M.

QrizB

Fink_Nottle said:

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.

There will always be taxpayers whose liability is small enough that collecting it is a net cost to the Exchequer.

Cobbler_tone

eskbanker said:

Cobbler_tone said:

My savings haven't been taxed (various interest across 6/7 accounts), despite being over the threshold the past 2 years. It's why my perception is that some of the systems and processes are not that slick, no idea if it is resource related. It is not a major saving so thought that might be down to the work involved vs the reward but I am pretty sure that discretion doesn't/shouldn't come into it! P.S. I'm employed and not in the world of self assessments.
If the backlog is that severe, any retrospective tax bill isn't going to break the bank and I'd happily take the adjustment. I've been waiting for the notification.

Have you received any P800 assessments from HMRC?  The onus is on you to pay the correct amount of tax, even though you may consider it justifiable not to if you haven't been asked....

No, the guidance clearly seems to be that as I'm employed and my savings providers will all write to HMRC and they'll do the rest. Like I said, if they write to me retrospectively it will be no big deal to settle up. I have tried to initiate contact with them on 'X' last year as outlined on gov.uk but didn't get any response, along with two lengthy recorded holds on the phone. I keep evidence of attempted contact for if/when they spring into life. The onus may be on the individual to chase them (if they don't write to you) but TBH I don't track every piece of interest from multiple sources as I have a job and assume they already have the information. I stopped short of sending a carrier pigeon with a cheque based on a guesstimate.
Imagine if you are an elderly person without any knowledge or IT skills, they aren't going to have a clue and will take whatever comes their way.
I'm not having a pop at them, just used to most people chasing you if/when you owe them money. Maybe they are looking to improve this part of their system. Still, they still have a couple of weeks to write to me for the previous tax year.

Brandee2024

Was so excited to finally get a letter from HMRC to inform me of my Pension status and dates for June! my only source of Income! savings have depleted, but, not enough to get any benefits! Having worked it out now? what little additional I get from the death of my husband Is going in tax?? really? Give with one hand and take away with other, think It's time State pensions regardless were tax exempt!!

Brandee2024

Can you imagine the mayhem self assessment will be for pensioners? what is this government doing to us? above and beyond the confusion already? Totally open to scammers looking to 'help' Focus needs to be on tax exemption for State pensions!!

molerat

What self assessment ?  If your pension is above your tax allowance you will be sent a simple assessment - a bill - to be paid by Jan the following year.  Nothing difficult about it.  Why should the pension be tax free ?

hugheskevi

There is an interesting evolution of Pension Credit and new State Pension that I haven't seen mentioned previously. Pension Credit is not taxable, new State Pension is taxable.

Taking the standard, single-person rate of Pension Credit with no disability or caring premiums, it is slightly less than the full rate of new State Pension. Arguably the extras that come with Pension Credit receipt would mean an individual is likely to prefer receiving Pension Credit rather than new State Pension. Still, at least the headline rates mean the full new State Pension person is a few pounds per week better off than the Pension Credit person ignoring the extras linked to Pension Credit.

However, if the new State Pension and Pension Credit increase by 4% per year, and the Personal Allowance increases by 2% per year from 2028, by 2029/30 the after-tax income of someone with new State Pension income only would be almost identical to the amount the Pension Credit individual receives (again ignoring all passported benefits).

That would be a terrible 'pays-to-save' message, acknowledging that there is already an existing issue with this. Also, every year there will be more in receipt of the full rate of the new State Pension, so an increasing number of end-of-year tax demands. There is the endless speculation over the future of Triple Lock existing in the background. It looks like the time might finally be coming in a few years when these secondary issues might force a reconsideration of how the State pension, tax, and means-tested systems work together, rather than just keep kicking the issues 5 years into the future with extensions to the Triple Lock.

jimi_man

Brandee2024 said:

Can you imagine the mayhem self assessment will be for pensioners? what is this government doing to us? above and beyond the confusion already? Totally open to scammers looking to 'help' Focus needs to be on tax exemption for State pensions!!

Why? I don't see why someone who is entitled to £13K State Pension be exempt from tax and yet someone else who perhaps isn't entitled to SP but funds the same amount themself, have to pay tax? 

State pensions should be taxed the same as every other form of income as that's what it is.