State pensioners may have to pay tax on their sum – check if you’re affected

State Pension: Expert outlines criteria to qualify

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The state pension offers important financial support in retirement to millions of people. However, it is worth noting there are rules when it comes to the receipt of the amount.

One of these rules relates to income tax, which will need to be paid in certain circumstances.

Individuals will pay tax if their total annual income adds up to more than their Personal Allowance.

The state pension is taxable income, but taxable income can also include:

  • Private pensions – although some of this can be taken tax-free
  • Taxable benefits
  • Additional state pension
  • Any other income such as money from investments property or savings.

State pension income is taxable, however, it is usually paid without tax being deducted.

Although tax is not deducted from the state pension, it can use up a person’s tax-free Personal Allowance.

The current tax-free Personal Allowance for 2022/23 is £12,570, while the full new state pension is worth £9,627.80 per year.

This means if a person receives the full new state pension sum they will have £2,942.20 of their Personal Allowance remaining.

This will be for other taxable income streams such as employment, or a private pension.

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The Government-backed website MoneyHelper has urged people to check they have paid the right amount of tax each year.

This is particularly the case if a person has a change in circumstances – such as retiring, or starting to draw a pension.

The website added: “If you don’t have other sources of income, such as other pensions or income from a job, and you started getting your state pension before April 6, 2016, you’ll have to complete a Self Assessment tax return each year if you owe any tax.”

This tax will then need to be paid directly to HM Revenue and Customs (HMRC).

For this reason, the service encourages individuals to put enough to one side to meet their tax liabilities.

For those who reached state pension age on or after April 6, 2016, HMRC will write to them and lay out how much tax they owe.

Individuals will therefore not need to complete a tax return. 

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At present, state pensioners do not have to pay National Insurance contributions.

However, working pensioners will have to pay the health and social care levy from 2023 onwards.

This will be the case as long as the individual is earning above the primary threshold.  

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