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.

Dinahmo

Shill29

Who has a state pension of more than £242 ????

Those people who didn't collect the state pension when they reached their pension age. Chatting to a friend yesterday she said she'd just decided to take her SP. She will be getting over £21,000 pa. I know others who have deferred the SP too.

There was a choice about how the deferred pension could be paid. It was either as a lump sum, taxed at source, or as enhanced payment.

I deferred, as I was still working full time, and chose to take the lump sum when I claimed my pension. So I am just paid the 'legacy pension'.

songstress60

I think when you retire your pension both state and private should be tax free. You have paid it all your lives, also the tax threshold should be raised to £18,000. How about getting those greedy pop stars and other celebrities paying tax instead of giving them loopholes to avoid paying tax altogether

You or your husband, along with everyone else who had an occupational or private pension will have received tax relief on the premiums paid. If they were working prior to Mrs T becoming PM they would have received tax relief up to £83% on the premiums paid.

Your State Pension increases by the equivalent of one per cent for every five weeks you defer. This works out as 10.4 per cent for every 52 weeks.

Madmeg

I paid a tiny amount of NI on my school holiday job aged 14 - 16. I went into fulltime work at 16 till I had a year off with my first child when I was 28. I worked part-time employed and self-employed till my eldest child was 12. The self-employment was almost fulltime but a lot of it was done at home in the evenings. When daughter was 12 I worked fulltime plus self-employed for the rest of my working life, paying Class 1, 2 and 4 NI (the latter being essentially just an additional tax on income). There were only a couple of years when I paid tax at 40%. At nearly 72 I am still doing some self-employed work, though not paying NI on it since drawing the state pension at age 63.

My husband didn't start work till he was almost 23. He is 5 years older than me, went to Uni, and retired at the state pension age of 65. Despite doing some self-employed work as well, he never had to pay Class 2 NI.

Despite extensive research, including getting my NI record, I have never worked out why my SP is over £20 a week less than his - both Legacy SPs - when I paid contributions for 5 years more than him and technically had Home Responsibilities Protection for 18 years.

Of course, the New State Pension is now streets ahead of mine despite all that I paid in NI for 47 years. Summat ain't right.

Fortunately I have an Occupational Pension as well as two small private pensions as well, and am not complaining about my overall income - just the unfairness of it all.

He would not have paid Class 2 NI if hew was employed. Employees have Class 1 NIC deducted from their salaries. class 2 is what used to be known as the self employed stamp.

Class 2 is not paid by anyone with profits less than £6515 although they can chose to pay it voluntarily. Class 4 is paid on profits over £12570 at 9.73%. (the rate reduces to 2.73% on profits over £50270)

GSM I didn't say what my husband's state pension was, but it is the full basic (legacy) amount plus a few pounds extra for Graduated Pension and other "old" additions. Well below £200 a week. Strangely, one of these elements was halved about 4 years ago whereas the rest have increased as expected.

suelld

I may seem an idiot here but HOW does one pay this tax?
Is Pension Credit included?
I have been self-employed for decades, and have had to do my paperwork and have an accountant who charges me nearly £400 per year.
The last couple of years I was ill and not trading for a while, now I am 77 and 85% retired but still trading in a very small way.
I still have to do paperwork and see my Accountant - so obviously he will have to adjust if my Pension is also included.
It drives me batty and I am getting very tired of the paperwork - I can’t do it online, (I hate figures) but still want to keep my small business going as I love it!
How are even older people going to manage this??

I think that you should at least try to complete a tax return yourself. You should have copies of previous accounts and tax returns from your accountant so you should be able to use those as a basis for completing the on line form.

Today is 27 October so you have a little over 3 months in which to sort it. It's worth trying - think what you could do with an extra £400.

Sorry I was going by memory and thought he was the one with the £240 SP. That’ll teach me to check before posting. It sounds a bit of a mystery though with the ‘old additions’.

Dinahmo, Class 2 NI is payable irrespective of any Class 1 payments (with an upper overall limit that I was way below, but my hubby was above). I effectively paid it for no extra benefit as my Class 1 contributions were enough to qualify for SP. In the early years Class 2 was over £6 a week. Class 2 did not qualify the self-employed to claim sickness or unemployment benefits either, though it might be different now.

suelld - you don't pay tax on Pension Credit, but your pension itself is taxable if your total taxable income is above the threshold. No avoiding it really.

As a mostly-retired accountant I would say that £400 is about the right figure to pay for a straightforward tax return, though it might surprise you that self-employed accounts are rarely totally straight forward, and only a qualified person would know if they are or not. But if your affairs are very simple (not requiring knowledge of tax law) the actual online return is very simple to follow.

I have two pensioners whose very simple returns I do, for free as they are strapped for cash and I like doing it. I also do the returns for a local charity cos an old friend is Treasurer and baulked at paying the accountant £400. The charity is cash-rich and there is complication after complication, so I am upping my bill this year to £500!!!

I don't understand why you paid Class 2 if you were in employment. When it was first introduced in 1985/86 (according to some old tables I've been checking) it was £4.75 pw. It increased regularly to ££6.55 pw in 1999/2000 and was then reduced to £2 pw in 2000/2001. It is higher now.

The self employed can claim Universal Credit and ESA.

Dinahmo

Shill29

Who has a state pension of more than £242 ????

Those people who didn't collect the state pension when they reached their pension age. Chatting to a friend yesterday she said she'd just decided to take her SP. She will be getting over £21,000 pa. I know others who have deferred the SP too.

Ah, of course!

Dinahmo, I was both employed and self-employed (profits a little above the exempt limit) so had to pay both at the same time. Still the case today, but back then ESA and UC didn't exist. I believe you were covered for maternity benefits - which I was anyway, cos of my employment.

I do get a healthy weekly pension which is added to my work pension and it has always been taxed. Pensioners with generous state pensions should pay tax. It is only right.

It is right, but people need to remember that after the SP crosses the threshold every pound we hear mentioned as a ruse in the pension is really 80p. A couple of quid now will soon become significant if the triple lock is honoured.

£12500 or so is not much to live on if you don’t get benefits on top of your pension, and it would be very easy to spin increases to look far more generous than they actually are.

Deferring SP is a good idea if you are sure you are going to live a long life. But we don’t know that, do we ? So, take your pension now. A bird in the hand is worth two in the bush 😂

DaisyAnneReturns

Your State Pension increases by the equivalent of one per cent for every five weeks you defer. This works out as 10.4 per cent for every 52 weeks.

DaisyAnneReturns it depends on when you received your state pension from:

www.gov.uk/deferring-state-pension/what-you-get

Madmeg

Dinahmo, I was both employed and self-employed (profits a little above the exempt limit) so had to pay both at the same time. Still the case today, but back then ESA and UC didn't exist. I believe you were covered for maternity benefits - which I was anyway, cos of my employment.

I think you should double check that. If you were paying NICs through employment, I'm almost sure you didn't have to pay for additional Class 2 contributions.

Madmeg is right. She would have to pay Class 2NIC on her self employed profits provided she was above the limit

Dinahmo

Madmeg is right. She would have to pay Class 2NIC on her self employed profits provided she was above the limit

Sorry, I've just checked it too. I had self-employed earnings while working, which I declared and paid tax on, but I didn't have to pay NICs - only on my earnings from employment.

Growstuff, you would not have needed to pay Class 2 if your self-employed profits were below the threshold for Class 2, or if your total of Class 1 and Class 2 NI contributions were above a certain limit (could happen if your employed income was fairly high such that you had already paid the maximum in Class 1). My employment income was not that high so I had to pay Class 2 in most years as well as Class 1. My hubby had a higher employment income so did not pay Class 2 at all.

V3ra

DaisyAnneReturns

Your State Pension increases by the equivalent of one per cent for every five weeks you defer. This works out as 10.4 per cent for every 52 weeks.

DaisyAnneReturns it depends on when you received your state pension from:

www.gov.uk/deferring-state-pension/what-you-get

That's true V3ra.