Not a full state pension plus a private pension

Silvertabby

Qyburn said:

rightfoot_shifter said:

... With the current government plans to ensure pensioners solely on full state pension never having to pay income tax ..

What the budget actually said was, note the bits I have put in bold ..

"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."

Note they say they'll ease the "administrative burden", rather than the tax burden. And they say pensioners won't have to pay "small amounts of tax via simple assessment".  In other words they could have said "won't pay tax" if that's what was meant.

But this has Chinese Whispered into 'those on just the State pension won't pay any tax' and really needs pinning down sooner rather than later. 

A neighbour, on a State pension of £24K (high rates of SERPS/SP2 and a few years of deferral at 10%) has said that would be nice, but he has the nous to know that what Rachel Reeves said (during the Martin Lewis interview) isn't what she meant.  

pinnks

I fail to see what is unclear from those written words. 

If your only income is the basic old pension, or the new state pension, and it exceeds the personal allowance, then you will not be taxed on the excess. 

If you have any other income, like increments from deferral, additional pension from SERPS, Protected Payment under the new rules, or other pensions, earnings or whatever, then all bets are off and normal tax rules apply.

Dazed_and_C0nfused

pinnks said:

I fail to see what is unclear from those written words. 

If your only income is the basic old pension, or the new state pension, and it exceeds the personal allowance, then you will not be taxed on the excess. 

If you have any other income, like increments from deferral, additional pension from SERPS, Protected Payment under the new rules, or other pensions, earnings or whatever, then all bets are off and normal tax rules apply.

I think the fact that DWP deducting tax up front would meet what is set out in those words means it is still not 100% clear what the reality will be.

"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."

eskbanker

pinnks said:

I fail to see what is unclear from those written words. 

If your only income is the basic old pension, or the new state pension, and it exceeds the personal allowance, then you will not be taxed on the excess. 

If you have any other income, like increments from deferral, additional pension from SERPS, Protected Payment under the new rules, or other pensions, earnings or whatever, then all bets are off and normal tax rules apply.

But it doesn't say "they do not have to pay small amounts of tax", it says "they do not have to pay small amounts of tax via Simple Assessment", i.e. as written, it's about the mechanism rather than the liability as such.

Having said that, I think there was some subsequent clarification in an interview that the intention is to consider eliminating the liability....

badmemory

I did wonder if they were going to raise the amount at which they did not collect the tax due.  I know that one of the early simple assessment years I calculated that I owed under £10 & they did not collect it.  I believe at that time the figure was £20, it could well be that they are just considering increasing this figure.

fuzzzzy

Considering this government has back tracked on so many things I'm not sure it really matters what was written down or later clarified.

kermchem

badmemory said:

I did wonder if they were going to raise the amount at which they did not collect the tax due.  I know that one of the early simple assessment years I calculated that I owed under £10 & they did not collect it.  I believe at that time the figure was £20, it could well be that they are just considering increasing this figure.

That idea will not work in April 2028, let alone 2030. SP set to increase by triple lock, at least 2.5%, personal allowance frozen. If this was Rachel Reeves plan, and it could be, then it is plain short-sighted. 

pinnks

Dazed_and_C0nfused said:

pinnks said:

I fail to see what is unclear from those written words. 

If your only income is the basic old pension, or the new state pension, and it exceeds the personal allowance, then you will not be taxed on the excess. 

If you have any other income, like increments from deferral, additional pension from SERPS, Protected Payment under the new rules, or other pensions, earnings or whatever, then all bets are off and normal tax rules apply.

I think the fact that DWP deducting tax up front would meet what is set out in those words means it is still not 100% clear what the reality will be.

"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."

DWP does not deduct tax at source and nothing I have heard suggests they are about to change that.  They have been quite clear in an exchange I had with them that tax is not theirs and they won't get embroiled in it.  Never say never but...

pinnks

eskbanker said:

pinnks said:

I fail to see what is unclear from those written words. 

If your only income is the basic old pension, or the new state pension, and it exceeds the personal allowance, then you will not be taxed on the excess. 

If you have any other income, like increments from deferral, additional pension from SERPS, Protected Payment under the new rules, or other pensions, earnings or whatever, then all bets are off and normal tax rules apply.

But it doesn't say "they do not have to pay small amounts of tax", it says "they do not have to pay small amounts of tax via Simple Assessment", i.e. as written, it's about the mechanism rather than the liability as such.

Having said that, I think there was some subsequent clarification in an interview that the intention is to consider eliminating the liability....

I don't disagree but the current alternatives are PAYE, which is not relevant if your only income is SP, and Self Assessment, which is even more administratively cumbersome than Simple Assessment.  Indeed the latter serves mainly to keep people with simple affairs out of SA.  So unless someone invents a whole new way pensioners could be subject to tax - and at what cost to introduce that in legislation and operationally - what might that mechanism look like?

badmemory

kermchem said:

badmemory said:

I did wonder if they were going to raise the amount at which they did not collect the tax due.  I know that one of the early simple assessment years I calculated that I owed under £10 & they did not collect it.  I believe at that time the figure was £20, it could well be that they are just considering increasing this figure.

That idea will not work in April 2028, let alone 2030. SP set to increase by triple lock, at least 2.5%, personal allowance frozen. If this was Rachel Reeves plan, and it could be, then it is plain short-sighted. 

But a plan to shut everybody up.