Pension income crept into higher rate tax

Oldmoondog

 I am somewhat annoyed that because of previous increases in pensions both Military and State have pushed me into the higher rate tax bracket.  In particular, for the first time since retiring over 15 years ago my total pensions received for the coming 12 months with be LESS than last year!  I believe this is as a result of the relatively large increases in pensions last year.  Is there anything I can do to reduce my tax burden?

BikingBud

How?

You only pay higher rate tax on the income over the higher rate threshold, eg if you get £100 over the threshold you should be £60 up.

You might find that the code used against your AFPS has been decreased as they cannot deduct PAYE from state pension.

Mine was chopped to allow another pension to be processed without any tax deductions.

Stubod

https://www.buzzacott.co.uk/news/gift-aid-how-giving-to-charity-can-reduce-your-tax-bill

JoeCrystal

Oldmoondog said:

 I am somewhat annoyed that because of previous increases in pensions both Military and State have pushed me into the higher rate tax bracket.  In particular, for the first time since retiring over 15 years ago my total pensions received for the coming 12 months with be LESS than last year!  I believe this is as a result of the relatively large increases in pensions last year.  Is there anything I can do to reduce my tax burden?

Not possible, with all your increases, you should be better off since taxes only take a share of your increased income, if that makes sense. You must have misunderstood something.

QrizB

Are your pensions less because HMRC are expecting you to have significant untaxed income from savings and investments?

Can you move those into eg. an ISA? Or give them to your spouse?

FIREDreamer

JoeCrystal said:

Oldmoondog said:

 I am somewhat annoyed that because of previous increases in pensions both Military and State have pushed me into the higher rate tax bracket.  In particular, for the first time since retiring over 15 years ago my total pensions received for the coming 12 months with be LESS than last year!  I believe this is as a result of the relatively large increases in pensions last year.  Is there anything I can do to reduce my tax burden?

Not possible, with all your increases, you should be better off since taxes only take a share of your increased income, if that makes sense. You must have misunderstood something.

Possible causes …

(1) Might have lost half the £1,000 savings interest allowance - reduced to £500 so a loss of £200 in increased tax.

(2) Loss of marriage allowance which is worth £254 to a basic rate taxpayer

However any pension increase should more than offset a tax increase of £454?

Oldmoondog

Thanks for all your responses - much appreciated.  My total income from my pensions amounts to over the £50,271.00 threshold, so I am getting taxed on that sum that is over at 40%! 

poseidon1

Oldmoondog said:

Thanks for all your responses - much appreciated.  My total income from my pensions amounts to over the £50,271.00 threshold, so I am getting taxed on that sum that is over at 40%! 

That still does not explain why you think your net pension receivable  (after 40% tax ) will overall be less than what you received when just a 20% tax payer.

Would your preference be for pension income to remain static and not increase further  in the years to come?  That would certainly limit your 40% tax exposure going forward. 

Flugelhorn

Oldmoondog said:

Thanks for all your responses - much appreciated.  My total income from my pensions amounts to over the £50,271.00 threshold, so I am getting taxed on that sum that is over at 40%! 

yes but you still get more than you did before you went over the threshold 

Albermarle

Oldmoondog said:

Thanks for all your responses - much appreciated.  My total income from my pensions amounts to over the £50,271.00 threshold, so I am getting taxed on that sum that is over at 40%! 

So the same as everybody else who has taxable income above that level.

Dazed_and_C0nfused

Oldmoondog said:

Thanks for all your responses - much appreciated.  My total income from my pensions amounts to over the £50,271.00 threshold, so I am getting taxed on that sum that is over at 40%! 

Have you factored in the fact that your increased State Pension is paid without any tax being deducted?