State Pension and Starting Rate for Savings

sparkiemalarkie

My husband has just received a simple assessment from HMRC
He only has a State Pension and interest from savings as his income.

His total income for the year of 2025/26 is just over £14,000

However he has been told that he owes £79 in tax

This seems really harsh. Does the Starting rate for Savings not apply to people on State Pension?

sx

Sam_666

You would need to look at taxman letter of calculation breakdown.
Clue would be there. Maybe you can post breakdown? It could be adjustment from previous tax years.

sparkiemalarkie

State Pension £12966
Interest from Savings £1082

sparkiemalarkie

Oh gosh, I have just realised that he is being taxed £79 on his state pension because his savings interest is £82 over the £1000 limit.

Is that right?

sx

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/82179016#Comment_82179016

No, nothing to do with the savings - if his SP is £12966, that's £396 over his personal allowance, so results in a tax liability of 20% of that excess, i.e. £79.

sparkiemalarkie

https://forums.moneysavingexpert.com/discussion/comment/82179020#Comment_82179020

Yes I see that, but I thought that the Government promised not to tax State Pension if it was the persons only form of income.

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/82179022#Comment_82179022

But it's not his only form of income - non-ISA savings interest is still taxable income, even if taxed at 0%.

Edit: I believe the comment you refer to stemmed from dialogue after last year's Budget, when the likelihood of the standard (new) SP eventually exceeding the frozen personal allowance was raised, which won't happen until 2027/28, so I don't believe that any retrospective commitment was made covering taxation of income for 2025/26.

It does still seem to be a live issue in terms of exactly how it will be worded, and hence Martin Lewis stirring the pot last week ahead of this year's Budget:

https://www.facebook.com/mrmartinlewis/posts/an-important-question-for-john-healey-next-april-full-new-state-pension-will-lik/10162614371521540/

which includes the question you're effectively asking:

But will that be a cliff edge?
If someone gets say just £30/yr from a tiny pension from an old job, would they lose that protection and face around £100 in tax for just thirty quid income?
And what about a little savings interest? Even if it's tax-free under the starting rate for savings, would it count as extra income and cost them the tax?
This needs to be thought through when you tell us in the budget.

sparkiemalarkie

Thank you

https://forums.moneysavingexpert.com/discussion/comment/82179016#Comment_82179016

Yes, what i was trying to say is - the interest on the savings over £1000 triggered the tax on his State Pension. (as he had more than 1 income)
If the savings had made that interest in an ISA say, he would have kept ALL of his State Pension

sx

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/82179032#Comment_82179032

Not for 2025/26 though. Or even 2026/27. Unless there is another change announced in the budget next week.

Woodstok2000

https://forums.moneysavingexpert.com/discussion/comment/82179032#Comment_82179032

No. Even if he had no other income he would have paid this tax as his pension is over the threshold on its own.

sparkiemalarkie

https://forums.moneysavingexpert.com/discussion/comment/82179045#Comment_82179045

Oh wow, this is complete rubbish!! How is anyone expected to live on £14,000 pa?

What's more, my husband has been given the choice of paying his £79 tax online or by downloading the app.
He can't do either. This takes away his independence and makes him feel useless as he has to now rely on someone else.

Wow, I'm shocked by how heartless the system is.