Tax on pension query..?

C_Mababejive
C_Mababejive Posts: 11,654 Forumite
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in Pensions, annuities & retirement planning
Just asking this question for a friend who has retired in last couple weeks.

With regard to work related pension, is it correct that it isnt taxed at source and that you have to do your own end of tax year return and pay whatever tax is due?? tnx
Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..
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Comments

  • TadleyBaggie
    TadleyBaggie Posts: 6,048 Forumite
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    The pension provider should be deducting income tax at source based on the tax code provided by HMRC.

    The exception is the state pension, which does not have tax deducted.
  • McKneff
    McKneff Posts: 38,819 Forumite
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    As above, if any tax is due, it will be deducted from the work pension
    make the most of it, we are only here for the weekend.
    and we will never, ever return.
  • dunstonh
    dunstonh Posts: 116,296 Forumite
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    State pension is probably what he is getting mixed up with. That isnt taxed at source.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • C_Mababejive
    C_Mababejive Posts: 11,654 Forumite
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    Thanks all,,i was just clarifying for a friend as im a bit of a way off my pension yet..

    Just another point,,,this person will possibly have to do a self assessment having been paye/never done a SA before. Would the state pension be included as a source of income for SA purposes and possibly therefore affect the total tax position at year end ?tnx
    Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..
  • dunstonh
    dunstonh Posts: 116,296 Forumite
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    Just another point,,,this person will possibly have to do a self assessment having been paye/never done a SA before. Would the state pension be included as a source of income for SA purposes and possibly therefore affect the total tax position at year end ?tnx
    #
    it would be unusual for someone who has never filled in a tax return to suddenly be told to fill in a full return.

    It is quite normal to be sent a summary form which just asks for income (single sheet of A4).

    Why would this person likely be sent a tax return?

    Pension income is income for tax purposes.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • C_Mababejive
    C_Mababejive Posts: 11,654 Forumite
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    tnx,,well we dont know, i guess it was just assumed that you would have to fill one in either of your own volition or be sent one,,. When you are working and just have maybe one regular income stream things are a lot clearer?

    Pension..so your saying that if the person exceeds their annual PA then the state pension could also become taxable?
    Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..
  • dunstonh
    dunstonh Posts: 116,296 Forumite
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    so your saying that if the person exceeds their annual PA then the state pension could also become taxable?

    Yes. Pensions are paid under PAYE. The same as an employed person. You get your tax code and its applied to your pension. You even get P60s.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Silvertabby
    Silvertabby Posts: 9,011 Forumite
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    edited 11 June 2017 at 1:24PM
    “ so your saying that if the person exceeds their annual PA then the state pension could also become taxable?
    ”
    Yes. Pensions are paid under PAYE. The same as an employed person. You get your tax code and its applied to your pension. You even get P60s.
    Just to add, DWP can't/won't tax the State pension at source. Instead, the personal allowance code applied to other pensions/income is adjusted, thereby taking any tax due from the State pension from the other pension/income.

    This can cause no end of confusion!
  • badmemory
    badmemory Posts: 7,734 Forumite
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    edited 11 June 2017 at 2:37PM
    The main scenario for having to do self assessment for someone like your friend would be if the tax due on the state pension (meaning state pension higher than personal allowance) plus the tax due on the other pensions came to more than half the other pensions. This is because, as yet, there is no tax code which can allow more than half an income to be taken in tax.
  • comeandgo
    comeandgo Posts: 5,742 Forumite
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    My husband completes self assessment as he has a few work pensions and state pension. The first few years he always had underpaid tax as HMRC are a bit slow in getting tax codes to pension providers. Now everything is on even keel we expect/hope this year will be the last one.
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