Will I have to pay tax on my state pension

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Q. I am approaching retirement age and I am looking forward to receiving my state pension. Will I have to pay tax on it?

A. The state retirement pension currently counts as taxable income. However, whether you have to pay tax on it will depend on the level of other taxable income you receive.

If your state pension exceeds your personal tax allowance (£12,500 in 2020/21), but you do not have any other source of income, then HMRC will collect the tax in a lump sum through another method. You will be sent a Simple Assessment (PA302 calculation). You will need to check that the figures are correct and pay by 31st January the following year. If you don't agree with the figures, you should contact HMRC immediately as late payment interest will be added after the payment deadline.

There is no mechanism to deduct tax due at source so those pensioners with occupational pensions have their personal tax allowance reduced by the amount of the state pension so that the tax due on both sources is all deducted from the occupational pension.

Further information on tax on pensions, see the GOV.uk website at https://www.gov.uk/tax-on-pension.
 

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Added By: Sharon Worger on 27th Aug 2020 - 12:14
Last Updated: 27th Aug 2020 - 12:28

Number of Views: 112
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