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With the income tax threshold frozen at £12,570 since 2021-22, anyone with a state pension next year of more than £242 a week will have some tax to pay.

(196 Posts)
DaisyAnneReturns Mon 23-Oct-23 17:29:39

www.theguardian.com/money/2023/oct/21/uk-pensions-warning-dont-get-caught-by-an-out-of-the-blue-tax-bill

www.youtube.com/watch?v=f5mmVv36fW0

Doodledog Mon 23-Oct-23 17:33:59

I saw that.

I don't think that pensions should be different from earned income when it comes to tax, but I do think that thresholds should be higher for all, and that everyone of working age should pay tax, rather than leaving the bill to those who work. We all use public services, after all.

Maybe there should be a cut-off after someone has paid in for X years, though - I'm not sure about that.

Whitewavemark2 Mon 23-Oct-23 17:39:57

Just a quick mull.

So the welfare state speaks “from cradle to grave” which I very much support. So I think that pensioners above an agreed level of income should pay tax like everyone else, as they must not be seen to be benefiting without contribution. It is not a good look.

DaisyAnneReturns Mon 23-Oct-23 18:04:47

All pensioners pay tax if their income is above the personal allowance. This is already the case. Pensions are treated exactly the same as earnings. THERE IS NO PREFERENTIAL TREATMENT FOR PENSIONERS. However, many are on incomes lower than the personal tax allowance.

The issue is the frozen allowances.

Doodledog Mon 23-Oct-23 18:08:11

I agree, WWM, but the problem is that as there is no NI paid, there is no mechanism for collecting the tax on pensions, so it will have to be paid retrospectively, and anyone on £12500 a year is going to struggle to keep money back for a tax bill. It is also likely to be expensive to collect.

I think that as £12500 is way below minimum wage, the threshold should be raised though.

DaisyAnneReturns Mon 23-Oct-23 18:30:15

Thank you for taking this straight off topic Doodle dog. I am sure those who find the have to pay tax for the first time on their pension, but have no personal pensions so it can be paid through PAYE, will be really grateful when they get a tax bill they haven't put money aside for.

Hopefully the publicity will stop to the "I only pay 22% on my vast wealth" Sunak letting this happen, but I won't hold my breath.

DaisyAnneReturns Mon 23-Oct-23 18:30:59

the have they have

Doodledog Mon 23-Oct-23 18:42:48

How have I taken it off topic? I have pointed out that it will have to be collected retrospectively, and be expensive to do as a result. I have also said that the threshold should, IMO, be raised, but that pensioners' income should be treated there same as that of others.

Do you always have to be so unpleasant? I don't know why people bother replying to your posts sometimes.

Dinahmo Mon 23-Oct-23 19:07:03

For anyone just receiving the state pension the taxable amount, assuming that the maximum pension is £242 per week, will be £14. The tax would be £2.80.

So no need to get one's knickers in a twist, unless of course one has other income.

Dickens Mon 23-Oct-23 20:16:27

DaisyAnneReturns

Thank you for taking this straight off topic Doodle dog. I am sure those who find the have to pay tax for the first time on their pension, but have no personal pensions so it can be paid through PAYE, will be really grateful when they get a tax bill they haven't put money aside for.

Hopefully the publicity will stop to the "I only pay 22% on my vast wealth" Sunak letting this happen, but I won't hold my breath.

Did you not think the topic would 'enlarge' as these matters usually do?

It's useful to be pointed to such relevant information - but maybe in future you should add something like, "This is for information only - please do not debate the issue!? grin

Whitewavemark2 Mon 23-Oct-23 20:18:48

😄

Blossoming Mon 23-Oct-23 20:30:28

I already pay tax through an occupational pension plan so that will no doubt increase. The only period of my adult life when I haven’t paid tax was during my student days.

DaisyAnneReturns Mon 23-Oct-23 20:36:51

If they have another income it is likely the PAYE system will pick up the tax.

If, however, they only have an additional form of State Pension, such as SERPS, they will have to make a tax return. How are they going to do this if the government doesn't flag up the position they are in? Some will know but, as the various sources for this thread seem to believe, the Government appears to have had no intention of warning people.

I wonder why that would be?

This government is a mess. Along side this they have underpaid many pensioners by not counting relevant years of childcare. How will those people cope if they have been receiving benefits? Will the government take the benefits out of the lump sum? What else will change for them?

I often help people with forms, interpreting DWP letters, etc. It is not just the tax that is a problem. You can feel the waves of anxiety coming from them just because the letter/form has arrived..

We are told the Conservatives look after "our taxes". That they are the Party of sound money. They can't even seem to get the simple bookkeeping right!

DaisyAnneReturns Mon 23-Oct-23 20:40:20

Blossoming

I already pay tax through an occupational pension plan so that will no doubt increase. The only period of my adult life when I haven’t paid tax was during my student days.

So not a problem for you, Blossoming - which is good. I don't think that should stop thinking of the poorer, more vulnerable elderly though.

Doodledog Mon 23-Oct-23 20:41:32

Aren't you taking the thread off topic by mentioning the uselessness of the government? Or people who have been underpaid?

I'm not sure I understand the rules of this thread.

Blossoming Tue 24-Oct-23 11:00:37

DaisyAnneReturns

Blossoming

I already pay tax through an occupational pension plan so that will no doubt increase. The only period of my adult life when I haven’t paid tax was during my student days.

So not a problem for you, Blossoming - which is good. I don't think that should stop thinking of the poorer, more vulnerable elderly though.

Why are you assuming I don’t care about those less fortunate? I’m commenting on my own circumstances not other people’s.

I don’t come from a privileged background.

maddyone Tue 24-Oct-23 11:07:10

Well of course pensioners should pay tax on their income if their income is sufficiently high.
However, the frozen tax allowances are a big issue because more and more people, pensioners or not, will be sucked into paying tax. And more people will be sucked into paying the higher rate of tax when they really are not receiving very high incomes. It’s a massive tax grab by Jeremy Hunt.

GrannyGravy13 Tue 24-Oct-23 11:22:37

The personal allowance needs to be increased along with the threshold for paying 40% tax as it is hitting middle income families hard when you take into account the mortgage interest rate rises.

Mollygo Tue 24-Oct-23 11:23:56

Here’s hoping KS steps smartly in and promises that won’t happen if you vote Labour.
Though if it turns out to be a money spinner . . .

I appreciate the warning, whether it will affect me or not. My main concern is that anything to do with the income tax department and back payment of tax is always made so complicated not simplified into an amount, like Dinahmo makes it up thread.

AGAA4 Tue 24-Oct-23 11:32:45

I have a private pension and a state pension. Tax is taken from my private pension. My state pension is included in this calculation as I thought that state pensions aren't taxed directly?

Doodledog Tue 24-Oct-23 11:39:14

maddyone

Well of course pensioners should pay tax on their income if their income is sufficiently high.
However, the frozen tax allowances are a big issue because more and more people, pensioners or not, will be sucked into paying tax. And more people will be sucked into paying the higher rate of tax when they really are not receiving very high incomes. It’s a massive tax grab by Jeremy Hunt.

Agreed, maddie.

And it seems idiotic to have a situation where a group of people fall into a system that is not set up to deal with them. It is basically cuttng the pension for those with no other income, and it is a dishonest way of doing it. Presenting the pension as £X a week when £Y is taken in tax will fuel the generational conflict so beloved of this government, but the recipients of the pension will be worse off.

It will make no difference to those with other pensions, as they already pay tax, but as time goes on an increasing proportion of everyone's income will be taxable.

Blossoming Tue 24-Oct-23 11:40:17

AGAA4 the state pension is included as taxable income, and it is paid gross. If the state pension rises enough to be above the tax threshold then people who have no other income will receive a bill from HMRC. I don’t think that situation has arisen up until now, but it will potentially hit many people when the next pension increase is received.

AGAA4 Tue 24-Oct-23 11:53:24

Blossoming

AGAA4 the state pension is included as taxable income, and it is paid gross. If the state pension rises enough to be above the tax threshold then people who have no other income will receive a bill from HMRC. I don’t think that situation has arisen up until now, but it will potentially hit many people when the next pension increase is received.

Thank you. I wasn't aware of this but people living on or below the personal tax allowance must find life a struggle. To then have a rise snatched away by tax is harsh.

NannyDaft Tue 24-Oct-23 11:58:32

I love taking my Grandchildren out to Christmas things - I think it is a lovely idea ! But it can be very tiring have plenty of breaks and a sit down Yes I too would have called my DH a similar name ! Enjoy

Visgir1 Tue 24-Oct-23 12:01:30

So no change then. You have always paid tax if you "earn" above the tax threshold.