HMRC slightly angry is an understatement

I don't know how the increase in my works pension has been reduced so much by tax that it is hardly worth having.

I think you need to check that, though Moonwatcher.

It depends on any other taxable income. My income is several small sources, but only one of them is taxed, ie, they have taken the total and just taken tax out of one.

Also, do you owe tax from a previous year.

Other complex irregular income, stocks and shares etc? (dont know how they do those)

If its neither of those then something is wrong?.

Thanks for the replies. I will check it out.

The tax free allowance of £12,570 was frozen by the Tories with effect from April 2021.

Every time your State Pension is increased you will pay more tax on your works pension. Whatever your SP goes up by annually, multiple that by 20% and divide that by 12. That’s how much extra tax you will pay per month.

Assuming there is nothing else affecting you tax code, for example underpayments from previous years or other untaxed income, then …

Last year you paid £6 per month or £72 per year which meant taxable income of £360 (£360 x 20% = £72) so your income must have been £12,930 (£12,570 + £360 ). If your works pension is a fixed £528 per year, that means your SP was £12,402.

If you are now paying £15 pm tax or £180 per year that means taxable income of £900. (£900 x 20% = £180) This means your total income is £13,470. Deduct the works pension of £528, your State Pension must now be £12,942.

So it sounds like your SP has increased by £540. Impossible for me to reconcile that without knowing how your SP is made up.

This month, the main part of the SP was increased by 4.8% and Additional State Pension and Protected Payments, which aren't triple locked, by 3.8%.

Whichever it is, £540 x 20% is £108 - the extra £9 a month.

It isn’t HMRC’s fault. They just collect the money. The government sets tax policy and successive chancellors have retained the frozen tax personal allowance. It's tax by stealth but the same for everyone.

Thanks Graphite. I've been on my Government Gateway tax account and yes it's correct.
I checked my DH account and they've done the same with his works pension too.
I suppose we shouldn't be surprised - give it with one hand and take it with the other.

They don’t tax pensions here because you have already paid tax on your earnings. However, they don’t give state pensions out to many of us because they means test them. Probably works out the same in the long run. The individual never comes out on top.

Yes it is because the state pension has increased this tax year so the tax taken from your works pension will increase as the state pension itself is paid untaxed. I think the tax threshold will continue to be frozen for several more years.
It has been the understanding that tax is what you pay to live in a civilised country. However I don't feel it's very civilised at the moment.

No, it is not robbery. It is the cost of living in a country where we have an extensive benefits system to help those in need, we have roads to walk along, public services that work, a health system that is free at point of use, , free eductaion under 18 and so on.

I have always paid my tax uite happily simply because I am grateful I live in a country like Britain and not in sub-sahaarn Afric, Iran, Lebanon or many other countries in our world racked by war or want.

nanna8

They don’t tax pensions here because you have already paid tax on your earnings. However, they don’t give state pensions out to many of us because they means test them. Probably works out the same in the long run. The individual never comes out on top.

Are you in Australia? I know they means test the pension there. Pension contributions are free of income tax in the UK. It is deferred income and taxed when taken.

I agree M0nica
And actually would rather we paid more tax so we could improve services.
(I'm not talking about lowest earners/poorest pensioners)

I guess any increase in tax will proportionately appear huge against a payment that is so small.

I agree with Monica. I’m sitting in a hospital waiting for my appointment (nothing vvv serious) thanking my lucky stars for same as she says. We all have to chip in.

I can remember my mum grumbling at my age what she was paying.
Sis reminded her that she had had 4 children, free hospitals, schools, lovely local park …

By not increasing the personal allowance, set by Tory and continued (a choice) by Labour we now all pay more tax by stealth. It’s known as fiscal drag. We are awarded an increased SP then it impinges against our personal allowance. If that rate was raised we wouldn’t pay as much tax!

I think there are resentments building though on how our taxes in the UK are being distributed. We cannot sustain being the World Health Organisation for starters … some arrive who haven’t paid in as we are all doing (not complaining either about that) yet seem to do Very Well out of our generosity.

Well stay in and negotiate a better deal then.

We all stand or fall together as human beans, you know: we need each other, we need to understand many health issues in ‘beyond national border terms’

Totally retrogressive imo to pull out. As we all travel and cross boundaries and borders more and more, we need WHO more and more:

And also we have imo a moral duty to help the very poor nations if we can with knowledge if nothing else, preferably also resources: which can help the spread of certain conditions.

…. and continued (a choice) by Labour

I know you enjoy more than a bit of Labour bashing but don’t forget Jeremy Hunt was first to extended the freeze for two years to 2028.

Had Reeves reinstated Rooker Wise* from this month it would save people paying tax at 20% just £2.20 a week or 30p a day.

*Rooker Wise was a Labour introduction in 1977 which indexed the personal allowance by the RPI every year. This had continued for decades until the Tories suspended it.

For the record, had Rooker Wise not been suspended by Sunak we would now have a personal allowance of around £16,000.

I can undertand why it was suspended - tax as a means to control inflation which was rising as a result of the pandemic easing and then rose sharply as a result of Russia's war on Ukraine.

With the kind of further inflation we are likely to see as a result of Trump’s war on Iran, by the time we get to 2029 the personal allowance could be edging close to £20,000.

Now which political party was it which promised a personal allowance of £20,000 within 100 days of taking office? Reform, of course.

Two months later, Yusuf said of their "contract with the people", the sums don’t add up on the basis that you implement everything in there on day one for arriving in Downing Street. That was never going to be the plan.

Questioned by the Telegraph in May 2025 on whether Reform, if elected in 2029, would increase the personal allowance to £20,000, Tice repeated this line.

When politicians throw around accusations of lying they would do well to look in the mirror.

The tax free allowance of £12,570 was frozen by the Tories with effect from April 2021.
Yes, this is the reason. Fiscal drag.

Every time your State Pension is increased you will pay more tax on your works pension. Whatever your SP goes up by annually, multiple that by 20% and divide that by 12. That’s how much extra tax you will pay per month.

I only pay tax on my works pension. Although it went up by 3.8% this year, out of the increase, after tax apparently I get less than £4 a month!
Don't splurge!

Yes, we know we have to all pay our share, we are not arguing that point, but the wealthy appear to chip in less proportionately or get away with none in some cases. The question is - is that fair?

I agree that we all need to pay a fair amount of taxes to fund the NHS, education and all the other things we take for granted. The problem is that it seems that they are now taking proportionally more tax from those of us on a low income. We used to pay 30% tax on taxable income, now it is 20%. I think we should revert to that and increase the personal allowance.

I definitely think there are resentments personal allowance ought to be increased. It is ridiculously low now.

Elusivebutterfly

I agree that we all need to pay a fair amount of taxes to fund the NHS, education and all the other things we take for granted. The problem is that it seems that they are now taking proportionally more tax from those of us on a low income. We used to pay 30% tax on taxable income, now it is 20%. I think we should revert to that and increase the personal allowance.

There was a recent discussion that got on to funding pensions and health care where people were comparing European countries particular Germany. I did look at the German system where they have more progressive tax bands. The tax free amount is similar but the tax bands start at 14%

I compared people with an income of £30,000. The tax rate here is 20% but the marginal rate in Germany was 31%.

I don’t see why we couldn’t have bands of say 15% and 17.5%, 20% and so on.

When a single pensioner with an income of less than £12,376 is deemed to need Pension Credit to make ends meet, a starting rate for tax of £12,570 is ludicrously low. In addition, the person claiming PC will be better off than the person caught in the tax net at £12,570 because of the other tax free benefits they can claim. Cliff edges again.

NotSpaghetti

I agree M0nica
And actually would rather we paid more tax so we could improve services.
(I'm not talking about lowest earners/poorest pensioners)

I will always pay my dues, but I think that we have a grossly badly managed state financing system in this country and will nit willingly commit anymore money to it because I beleieve extra taxation will probably make things worse.

The waste in the NHS that rises from inefficient admin systems, lack of coordination between services etc Our defence spending is grossly mismanaged, both army and navy design and procurement is a scandal. The army has paused trainiing for its new Ajax armoured vehicle because soldiers travelling in it were made ill by noise and vibration. This is a programme that is running 8 years late and a minimum of _£1 billion over budget. The navy has similar problems.

Elusivebutterfly

I agree that we all need to pay a fair amount of taxes to fund the NHS, education and all the other things we take for granted. The problem is that it seems that they are now taking proportionally more tax from those of us on a low income. We used to pay 30% tax on taxable income, now it is 20%. I think we should revert to that and increase the personal allowance.

I don't understand your point.

The lowest level of income tax IS 20 %.

Why do you want to pay 30% ?

Butterandjam - my point is that there are pensioners on an income just above needing Pension Credit to top up their income who are paying tax, due to the frozen Personal Allowance.
The Personal Allowance should be raised so that the poorer people do not pay tax. Increased tax rates, possibly graduated as Graphite suggested, would mean the Government gets the same revenue.

My total income is £14000 pa, taxed of course. My sister has only the state pension so gets Income Support as well, bringing her total to about the same as mine. With Income Support she gets lots of other benefits which save her money. I resent this.