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State Pension taxable
Comments
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She did clarify on live TV when in discussion with ML shortly after the budget:
Martin: "But people will have to pay the tax. They just won't have to do a return? Or will they not have to pay the tax?"
The Chancellor: "In this Parliament, they won't have to pay the tax."
As above, the wording of the budget commitment is:
pensioners whose sole income is the basic or new State Pension without any increments
although perhaps there'll be room for debate about exactly what 'increments' denotes!
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I still thinking aligning 40% tax threshold with the rate of new state pension is easiest way.
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As in not have a basic rate band 😳
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um - no I mean if full flat rate state pension is £12,750 then that should be new 20% tax threshold (did I say 40%? meant 20%)
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It was NOT stated that the first £12570 would not be taxed.
Only that if you only receive the basic new pension. and no other income, you would not have to pay tax on.
No information has been given as to how it will work.I don’t think it has even been worked out how to do it yet.
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It didn't have to be stated that the first £12,570 would not be taxed, as it's been that way already for many years!
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Agreed that SP has always been taxable, but the OP may be assuming no tax because the personal allowance was historically significantly higher than the SP and thus there was perhaps little danger of the SP being taxed. Interesting chart below showing the fiscal drag of the PA compared with the SP over the years.
The tax screw is being tightened even further given the decreasing gap between the two.
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Two points
The new state pension in tax year 2026/27 is £241.30 per week, which is roughly £12548 per year (depending on whether the rise occurs in the first week of the tax year). The chart shows the 2026/7 value below £12K so something awry.
Assume that the new state pension will continue to rise by at least 2.5% under the lowest point of the triple lock, and the personal allowance is currently frozen until at least April 2031 (pending a General Election and change of government policy). Draw the chart out to 2030/31 tax year.
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Nothing awry - 26/27 SP was a forecast on the chart from 23/24
I take your point on the second para - which was my point. Fiscal drag on the PA will bring SP into taxable for many.
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£12570 is the basic tax allowance everyone gets….
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