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Income Tax on pension


trevor33
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Hi all.

I am a bit confused. I received a self assessment form recently. The first one for many years. My only income is State Pension. I went on-line to find some info. I went through the form filling process and at the end it said that I should not be required to send in a self assessment form and to phone for conformation. I phoned and was told that I had to pay tax on my STATE PENSION on anything over the tax free allowance of £10,600, needless to say I was gobsmacked. If this is the case, I think that a lot of people who receive State Pension are unaware that they need to pay tax on it.

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If your only income is state pension I wouldn't have thought you get over £10,600.

 

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I think that most male pensioners receive more than the £10,600

 

Not my husband. :(

 

What's Best for You?

 

 

The Consumer Action Group is a free help site.

Should you be offered help that requires payment please report it to site team.

 

Alliance & Leicester Moneyclaim issued 20/1/07 £225.50 full settlement received 29 January 2007

Smile £1,075.50 + interest Email request for payment 24/5/06 received £1,000.50 14/7/06 + £20 30/7/06

Yorkshire Bank Moneyclaim issued 21/6/06 £4,489.39 full settlement received 26 January 2007

:p

 

Advice & opinions given by Caro are personal, are not endorsed by Consumer Action Group or Bank Action Group, and are offered informally, without prejudice & without liability. Your decisions and actions are your own, and should you be in any doubt, you are advised to seek the opinion of a qualified professional.

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Hello there.

 

I agree with Caro, the basic State pension is £6029 pa at the moment. You might get other State pensions like SERPS or Graduated pension, but I'm not sure how you would end up over the tax free allowance.

 

Can you tell us more please?

 

HB

Illegitimi non carborundum

 

 

 

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Well, as £240 a week is over the £10,600 limit, the balance would be taxable.

 

I'm surprised at the extra amount you're getting, though. Graduated/EPB pension isn't normally that much, as it only ran from 1961 to 1975. Maybe you have other additional pensions from the State?

 

HB

Illegitimi non carborundum

 

 

 

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Even for a couple it's only just over £230 a week.

 

What's Best for You?

 

 

The Consumer Action Group is a free help site.

Should you be offered help that requires payment please report it to site team.

 

Alliance & Leicester Moneyclaim issued 20/1/07 £225.50 full settlement received 29 January 2007

Smile £1,075.50 + interest Email request for payment 24/5/06 received £1,000.50 14/7/06 + £20 30/7/06

Yorkshire Bank Moneyclaim issued 21/6/06 £4,489.39 full settlement received 26 January 2007

:p

 

Advice & opinions given by Caro are personal, are not endorsed by Consumer Action Group or Bank Action Group, and are offered informally, without prejudice & without liability. Your decisions and actions are your own, and should you be in any doubt, you are advised to seek the opinion of a qualified professional.

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It seems a bit strange that I have to pay tax on an income that is paid from tax contributions. I have been working since 'time began' (it seems) so I have paid all my contributions so now I should be getting what I am owed from the state.

Even if my pension is made up of various parts and is over the £10,600 minimum I still do not see why I have to pay income tax on the extra. The Pension People have decided what I should get so if I have to pay tax, why is it not deducted before it is paid to me?

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I don't know because I've never heard of anyone getting state pension that goes over the tax limit. It doesn't make sense to me. Do you get pension credits?

 

What's Best for You?

 

 

The Consumer Action Group is a free help site.

Should you be offered help that requires payment please report it to site team.

 

Alliance & Leicester Moneyclaim issued 20/1/07 £225.50 full settlement received 29 January 2007

Smile £1,075.50 + interest Email request for payment 24/5/06 received £1,000.50 14/7/06 + £20 30/7/06

Yorkshire Bank Moneyclaim issued 21/6/06 £4,489.39 full settlement received 26 January 2007

:p

 

Advice & opinions given by Caro are personal, are not endorsed by Consumer Action Group or Bank Action Group, and are offered informally, without prejudice & without liability. Your decisions and actions are your own, and should you be in any doubt, you are advised to seek the opinion of a qualified professional.

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I don't know because I've never heard of anyone getting state pension that goes over the tax limit. It doesn't make sense to me. Do you get pension credits?

No

I am not at home at present so I do not know how it is made up.

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Your pension contributions are subtracted from your pay when you are working net of tax (and NI) so when it is paid to you when you retire it is considered deferred pay in the eyes of the law. Any income over the £10,600 threshold is taxable (but no NI contributions from pension income or from those over 65). There are anomalies to those who earn more than £100k and for those with a larger pension contribution than the expected lifetime amount as they cannot claim the full tax relief and also pay tax on their contributions and pension pot. They get taxed 3 times on the same money but if I was getting a pension of £60k+ and a lump um of nearly £500k I wouldnt be too worried.

Your state pension, not including SERPS will be under that amount by a considerable margin. There are other benefits you may receive at the same time such as the guaranteed minimum income payment and if you were working or earning interest on savings in the tax year then HMRC want to know if they are getting things right as they normally make a complete hash of things when a mixed income is concerned.

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My Husbands state pension is only just below the tax limit he is on £200 a week made up of basic state pension, second pension (he worked for 45 years) plus extra for paying enhanced NIC in the 90s, his private pension about £250 a month takes him over his personal allowance therefore he pays tax.

 

 

The Pension People have decided what I should get so if I have to pay tax, why is it not deducted before it is paid to me?

 

 

I remember from reading my Husbands letter from HMRC that thy are not allowed to tax the state pension at source which is why my Husbands private pension provider has to deal with his tax

 

 

 

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The Pension People have decided what I should get so if I have to pay tax, why is it not deducted before it is paid to me?

 

But how would DWP, who calculate your state pension, know what other income you have from other sources (such as a private pension?) Your state pension at £200pw is c£10,400 a year, less than this year's tax allowance. There's no reason for DWP to deduct tax even if they did have the procedures in place to do that.

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