Tax Code for Pensioners.

[LenEV2016]

Great minds think alike.
Pity the Government, didn't.

That is because they don't have a great mind

 

[Ian Key]

I've just had my pension payments confirmed and for reasons I can't quite work out but probably to do with the option to opt out of SERPS for a few years (an option which ran between 1978 and 2002) and having protected payments, which have been added to my standard state pension, I'm getting more state pension than the basic amount pushing it to just over the tax threshold.

I'll have to pay £2 per month income tax on my state pension.

 

[Gomev]

Think, doubling the threshold just for State Pension is the wrong way to go, it will put a lot of folks back up.
Just simply make State Pension tax free.
No matter what the Tax threshold is.
Or is that to, simple?
You'll still pay more tax, on your private pensions. As the state pension goes up. And your private pension goes up, with cost of living rises, the government will get more tax.
Just leave the state pension, alone, that will pacify, most folk.

Making the State pension tax free (non taxable) is in effect doubling the threshold for pensioners. This is because you would then still have your personal tax free allowance against taxable income. That is because of the difference in meanings of taxable income and non-taxable like in normal savings versus ISAs.
My suggestion to get round this is simply that for anyone in receipt of state pension the personal tax allowance should be the higher of full new state pension or the current personal allowance at that time. This fulfils keeping the the state pension out of taxation but anything extra is taxable.

 

[salty]

Yep, which ever way you want to, word it/do it. As long as SP is kept, tax free.

 

[salty]

I've just had my pension payments confirmed and for reasons I can't quite work out but probably to do with the option to opt out of SERPS for a few years (an option which ran between 1978 and 2002) and having protected payments, which have been added to my standard state pension, I'm getting more state pension than the basic amount pushing it to just over the tax threshold.

I'll have to pay £2 per month income tax on my state pension.

Yep, that's obviously, next to nothing. But that's not the point. It just shouldn't be taxed, end of.

 

[mg4mc]

I thought the current plan (proposal, whatever) was that if you had no additional income, then any tax on the pension would be waived?

But making the pensioners tax allowance the greater of the SP or the standard personal allowance sounds like the best way forward.

 

[GaryMG4]

I've just had my pension payments confirmed and for reasons I can't quite work out but probably to do with the option to opt out of SERPS for a few years (an option which ran between 1978 and 2002) and having protected payments, which have been added to my standard state pension, I'm getting more state pension than the basic amount pushing it to just over the tax threshold.

I'll have to pay £2 per month income tax on my state pension.

I was in and out of SERPS over that period so I pay a little over £40 a month on my state pension.

 

[salty]

I was in and out of SERPS over that period so I pay a little over £40 a month on my state pension.

Do you mean you would pay. If it they do tax SP. Let's hope they don't.

 

[GaryMG4]

Do you mean you would pay. If it they do tax SP. Let's hope they don't.

Do pay, I have an old defined benefit 'beer money' pension. they take half of that to pay the tax on the SP and 20% of the private pension.

 

[salty]

Do pay, I have an old defined benefit 'beer money' pension. they take half of that to pay the tax on the SP and 20% of the private pension.

Didn't know that. Thought SP was totally tax free at the moment. I know you pay tax on the combined SP and any private pensions if it's over the Tax threshold of
£12,570 But they take it from your private pensions, not your SP. So therefore your SP is actually tax free.

 

[GaryMG4]

Didn't know that. Thought SP was totally tax free at the moment. I know you pay tax on the combined SP and any private pensions if it's over the Tax threshold of
£12,570 But they take it from your private pensions, not your SP. So therefore your SP is actually tax free.

Not really, as the SP counts towards the tax threshold, my SP including SERPS is above £12,570 so that portion is taxed as is any other income. The issue that has caused this is the freezing of the threshold for another 3 years, with the triple lock the SP is guaranteed to increase above the threshold which means pensioners that only have the SP will be liable for tax, but there is no mechanism to deduct the tax due from the SP. So they will either have to do a self assessment or find themselves with an unexpected bill at the end of the year.

 

[mg4mc]

So they will either have to do a self assessment or find themselves with an unexpected bill at the end of the year.

Or as RR has said, they may waive the tax.

It's still a long way off anyway, much can change in the meantime.

 

[MG Clive]

It's still a long way off anyway, much can change in the meantime.

It's not a long way off until Pensioners have to pay tax on their pension, it's less than16 months.

 

[salty]

It's not a long way off until Pensioners have to pay tax on their pension, it's less than16 months.

Still a fair way off. 16 months. Jesus! this government can change their mind, next week.

 

[mg4mc]

Yep a long time in politics.

But anyway the current statement is that they will not have to pay the tax due, it will be waived for people whose only income is the state pension.

 

[salty]

Yep a long time in politics.

But anyway the current statement is that they will not have to pay the tax due, it will be waived for people whose only income is the state pension.

Which is good. But not good enough. Anyway we'll see.

 

[JohnV6]

The state pension right now goes against your free tax allowance. I guess they could say if your state pension exceeds the alowance as mine will in 26/27 then that portion is tax free. I have other pensions so they get me anyway.

My wife will just hit the threshold next year. do they really want to collect trivial tax from OAPs. The admin will kill any gain.

Mind you that was why the winter fuel allowance wasn't taxed or means tested. Now they pay me to then claw it back. Madness & hardly the Toyota Way. Mudha on the gemba me thinks.

 

[tsedge]

Yep a long time in politics.

But anyway the current statement is that they will not have to pay the tax due, it will be waived for people whose only income is the state pension.

Where does it say that will be waived?

From the Autumn Budget Official Document:
"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."

What this means is pensioners whose State Pension rises to exceed the 20% tax threshold will not have to do a self-assessment tax return. This is about simplifying the paperwork only.

It doesn't mean they won't pay the tax - it means there will be simple way for them to pay this tax (probably deducted before receiving the pension automatically, I would imagine).

 

[LenEV2016]

Yep a long time in politics.

But anyway the current statement is that they will not have to pay the tax due, it will be waived for people whose only income is the state pension.

I love this government, I have nothing against looking after people in their retirements but yet again people that have worked hard contributed large sums of money to company pensions schemes will get penalised.

I don't mind paying tax but things need to be the same for everyone, people with company pension will pay far more tax anyway
Just the latest in a long line of policies that go after people who have worked hard to improve their life's.

Mess with ISA's looking at rebranding houses above certain values, tax on salary sacrifice. And all the while rewarding people that dont want to work and have made a career of being on benefits and popping out babies. If you can't afford to have children without extra benefits don't bloody have them.
I even heard a couple of the feckless ********* talking in the local about waiting on their benefits hitting their bank but calling it their pay, boils my p***, rant over

 

[salty]

Excellent Rant!