What is the definition of income when assessing tax on pension

SouthCoastBoy

State pensioners with no other income will not have to pay income tax once over the tax threshold. Forget the detail whether just new state pension etc. Is it clear what the definition of income is? Is it taxable income or does it include money from savings, lump sum tax free cash etc. Any ideas?

QrizB

SouthCoastBoy said:

Is it clear what the definition of income is?

No.

SouthCoastBoy said:

Is it taxable income or does it include money from savings, lump sum tax free cash etc.

Maybe.

SouthCoastBoy said:

Any ideas?

Speculation is unlikely to be helpful but people will no doubt do so anyway.

SouthCoastBoy

as clear as mud then

Albermarle

Obviously I do not really know, but as savings withdrawals, tax free lump sums etc do not register with HMRC as income, so presumably difficult to include them.
Another scenario is someone drawing state pension only, and not withdrawing from a crystallised DC pot.
When it comes to benefits, a notional withdrawal income is taken into account ( similar as if you bought an annuity).

SouthCoastBoy

Just seems easier to tax everybody by the same rules. Say you have a pension paying a small amount per annum, you may be better off not taking it?

MeteredOut

QrizB said:

SouthCoastBoy said:

Is it clear what the definition of income is?

No.

SouthCoastBoy said:

Is it taxable income or does it include money from savings, lump sum tax free cash etc.

Maybe.

SouthCoastBoy said:

Any ideas?

Speculation is unlikely to be helpful but people will no doubt do so anyway.

Agreed.

So, with that in mind, I think it'll be based on any other income that can be collected via an individuals tax code. 

NorthYorkie

SouthCoastBoy said:

State pensioners with no other income will not have to pay income tax once over the tax threshold. Forget the detail whether just new state pension etc. Is it clear what the definition of income is? Is it taxable income or does it include money from savings, lump sum tax free cash etc. Any ideas?

Why do you say that "State pensioners with no other income will not have to pay income tax once over the tax threshold."? If their state pension exceeds the personal allowance of £12,570 then they will have to pay income tax.

If by "money from savings" you mean the interest credited on savings account, then yes, it is income (unless from an ISA). Also with regard to "lump sum tax free cash", there is a clue in the title.

Albermarle

NorthYorkie said:

SouthCoastBoy said:

State pensioners with no other income will not have to pay income tax once over the tax threshold. Forget the detail whether just new state pension etc. Is it clear what the definition of income is? Is it taxable income or does it include money from savings, lump sum tax free cash etc. Any ideas?

Why do you say that "State pensioners with no other income will not have to pay income tax once over the tax threshold."? If their state pension exceeds the personal allowance of £12,570 then they will have to pay income tax.

If by "money from savings" you mean the interest credited on savings account, then yes, it is income (unless from an ISA). Also with regard to "lump sum tax free cash", there is a clue in the title.

The Govt has announced post budget that people whose only income is the state pension and that when the SP increases above the personal allowance they will not have to pay tax.
The mechanism of how that will work is not known.

NoMore

NorthYorkie said:

SouthCoastBoy said:

State pensioners with no other income will not have to pay income tax once over the tax threshold. Forget the detail whether just new state pension etc. Is it clear what the definition of income is? Is it taxable income or does it include money from savings, lump sum tax free cash etc. Any ideas?

Why do you say that "State pensioners with no other income will not have to pay income tax once over the tax threshold."? If their state pension exceeds the personal allowance of £12,570 then they will have to pay income tax.

If by "money from savings" you mean the interest credited on savings account, then yes, it is income (unless from an ISA). Also with regard to "lump sum tax free cash", there is a clue in the title.

You don't seem up to date with what the chancellor recently announced. 

State pensions will NOT be taxed under Labour, Rachel Reeves reveals to Martin Lewis

eskbanker

Albermarle said:

NorthYorkie said:

SouthCoastBoy said:

State pensioners with no other income will not have to pay income tax once over the tax threshold. Forget the detail whether just new state pension etc. Is it clear what the definition of income is? Is it taxable income or does it include money from savings, lump sum tax free cash etc. Any ideas?

Why do you say that "State pensioners with no other income will not have to pay income tax once over the tax threshold."? If their state pension exceeds the personal allowance of £12,570 then they will have to pay income tax.

If by "money from savings" you mean the interest credited on savings account, then yes, it is income (unless from an ISA). Also with regard to "lump sum tax free cash", there is a clue in the title.

The Govt has announced post budget that people whose only income is the state pension and that when the SP increases above the personal allowance they will not have to pay tax.
The mechanism of how that will work is not known.

Unless there's been any subsequent clarification, what was actually announced was:

4.167 State Pension and Simple Assessment – The government will ease the administrative burden for pensioners whose sole income is the basic or new State Pension without any increments so that they do not have to pay small amounts of tax via Simple Assessment from 2027-28 if the new or basic State Pension exceeds the Personal Allowance from that point. The government is exploring the best way to achieve this and will set out more detail next year.

which doesn't say they won't be taxed, it just says it won't be paid via Simple Assessment.  On another thread, it was suggested that tax might be deducted at source, for example....

SouthCoastBoy

eskbanker said:

Albermarle said:

NorthYorkie said:

SouthCoastBoy said:

State pensioners with no other income will not have to pay income tax once over the tax threshold. Forget the detail whether just new state pension etc. Is it clear what the definition of income is? Is it taxable income or does it include money from savings, lump sum tax free cash etc. Any ideas?

Why do you say that "State pensioners with no other income will not have to pay income tax once over the tax threshold."? If their state pension exceeds the personal allowance of £12,570 then they will have to pay income tax.

If by "money from savings" you mean the interest credited on savings account, then yes, it is income (unless from an ISA). Also with regard to "lump sum tax free cash", there is a clue in the title.

The Govt has announced post budget that people whose only income is the state pension and that when the SP increases above the personal allowance they will not have to pay tax.
The mechanism of how that will work is not known.

Unless there's been any subsequent clarification, what was actually announced was:

4.167 State Pension and Simple Assessment – The government will ease the administrative burden for pensioners whose sole income is the basic or new State Pension without any increments so that they do not have to pay small amounts of tax via Simple Assessment from 2027-28 if the new or basic State Pension exceeds the Personal Allowance from that point. The government is exploring the best way to achieve this and will set out more detail next year.

which doesn't say they won't be taxed, it just says it won't be paid via Simple Assessment.  On another thread, it was suggested that tax might be deducted at source, for example....

There is the following on the bbc website, https://www.bbc.co.uk/news/articles/cev8ed9klz1o