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. Currently, the state retirement pension counts as taxable income. However, whether you must 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 letter (PA302 calculation). You will need to check that the amounts in it are correct and pay by the following 31st January. If you disagree with the figures, you should contact HMRC straightaway. Late payment interest will start after the payment deadline.
There is no mechanism to deduct tax due at source so those 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 about tax on pensions, can be found on the GOV.uk website.
The information provided in this blog is for general informational purposes only and should not be considered professional advice. As far as we are aware, the content is accurate at time of publication. Torgersens assumes no responsibility for errors or omissions in the content or for any actions taken based on the information provided.
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