@golfaddick Not sure why you are suggesting the State pension is not taxed? Of course it is. It was in my taxable income for the last 8 years or so. If I had made 12k on, say, rental only in a year, and not had a state pension, I wouldn't have paid any tax.
It's only "not taxed" if you don't have to declare it, surely?
Exactly your last point, it’s not taxed (at source), but generally you simply pay the tax on it via your other income, if you have any.
Yes this.
The State Pension is taxable, but it is always paid in full without any tax taken off (should you have any other income). Its that other income that is then taxed at source and paid net.
This is the problem I've been trying to highlight. There are lots of pensioners (millions?) whose only income is the State pension. Soon the State Pension will exceed the Personal Allowance. If so, where will the tax be taken from ? They have no other income to be taxed, so logically it will have to be deducted from the State Pension. But seeing as the State Pension has never had tax taken from it something will have to budge.
And I'm only been talking about the State 2nd Pension (the new one) that anyone retiring after 2016 has been receiving. There are millions drawing money from the old State Pension (my father for one) who get more due to the many changes the "Old Age Pension" has gone through. This has been brought to my attention, not only because of the forthcoming triple lock issues, but because my father is already receiving in excess of the PA and not paying tax (his pension includes the Graduation Pension and years of being contracted in during the 50's & 60's when there were no Company schemes for manual workers).
However.....I've just checked online & it seems that plans are already on place. Pensioners whose State Pension is in excess of the PA will be sent a simple assessment letter from HMRC. They will have done a calculation, based on information from DWP, and will simply ask for a payment from the individual. This is supposedly starting from the summer of 2026 & will have until 31st Jan 2027 to pay it.
Eg. Someone has a State Pension of £14000. Take off their PA of £12570 leaves taxable income of £1,430. 20% of that = £286.
I still think this will panic a lot of pensioners.
Edit.
Since writing my monologue it appears that @bobmunro has answered it more succinctly.
I've been due back some tax, from my 2023/2024 self-assessment return, refund request submitted April 2024. The payment turned up today, after 19 months. HMRC must have a hefty backlog going on!
Wouldn't it be great if the personal allowance got the triple lock treatment? Then it's solved and closer to some form of equity for working people.
There was a call to increase the PA from £12,570 to £20,000 - that would cost £50 billion! Even raising it to say £16,000 would be cost prohibitive for our busted economy.
It aint happening - the most likely outcome is that from 2028/29 tax year it will increase by CPI each year, but that still might not happen.
Would be nice if something similar was done to pensions then, interesting how that is affordable...
It isn’t affordable. That’s why it isn’t being implemented.
The point I'm making is how raising the personal allowance in line with triple lock criteria is easily dismissed as "unaffordable" yet getting rid of the triple lock, let alone means testing pensions is seen as unspeakable, when in reality triple locking pensions is unaffordable...
State pensions will have to be completely overhauled at some point.
The grown up thing to do would be to go back on the election promise and up income tax a little at the top end.
Yes they would take some heat but lots of excuses / rationale could be trotted out to mitigate the flack they will get - which will happen regardless.
They still have a few years grace to get away with that.
If they only did that at the top end and not to a silly amount I think it would land ok with most.
Couple with adopting a flat rate on pension contributions that is greater than now for basic rate payers and less for higher rate payers I think they could buy themselves some extra tax revenue without outright revolt.
Wouldn't it be great if the personal allowance got the triple lock treatment? Then it's solved and closer to some form of equity for working people.
There was a call to increase the PA from £12,570 to £20,000 - that would cost £50 billion! Even raising it to say £16,000 would be cost prohibitive for our busted economy.
It aint happening - the most likely outcome is that from 2028/29 tax year it will increase by CPI each year, but that still might not happen.
Would be nice if something similar was done to pensions then, interesting how that is affordable...
It isn’t affordable. That’s why it isn’t being implemented.
The point I'm making is how raising the personal allowance in line with triple lock criteria is easily dismissed as "unaffordable" yet getting rid of the triple lock, let alone means testing pensions is seen as unspeakable, when in reality triple locking pensions is unaffordable...
State pensions will have to be completely overhauled at some point.
I’m not so sure. Not enough save or can afford to save for retirement so changing it significantly might just create more issues.
It’s also political suicide to do something radical so falls into the category of leave alone or only tweak.
Saw a piece on tv the other day that said that pre the triple lock a typical 2 pensioner household's income was roughly the same as a 2 adult / 2 children household income.
It is now £5k pa more, as pensions have gone up year by year but working incomes haven't due to pay freezes etc.
Comments
The State Pension is taxable, but it is always paid in full without any tax taken off (should you have any other income). Its that other income that is then taxed at source and paid net.
This is the problem I've been trying to highlight. There are lots of pensioners (millions?) whose only income is the State pension. Soon the State Pension will exceed the Personal Allowance. If so, where will the tax be taken from ? They have no other income to be taxed, so logically it will have to be deducted from the State Pension. But seeing as the State Pension has never had tax taken from it something will have to budge.
And I'm only been talking about the State 2nd Pension (the new one) that anyone retiring after 2016 has been receiving. There are millions drawing money from the old State Pension (my father for one) who get more due to the many changes the "Old Age Pension" has gone through. This has been brought to my attention, not only because of the forthcoming triple lock issues, but because my father is already receiving in excess of the PA and not paying tax (his pension includes the Graduation Pension and years of being contracted in during the 50's & 60's when there were no Company schemes for manual workers).
However.....I've just checked online & it seems that plans are already on place. Pensioners whose State Pension is in excess of the PA will be sent a simple assessment letter from HMRC. They will have done a calculation, based on information from DWP, and will simply ask for a payment from the individual. This is supposedly starting from the summer of 2026 & will have until 31st Jan 2027 to pay it.
Eg. Someone has a State Pension of £14000. Take off their PA of £12570 leaves taxable income of £1,430. 20% of that = £286.
I still think this will panic a lot of pensioners.
Edit.
Since writing my monologue it appears that @bobmunro has answered it more succinctly.
State pensions will have to be completely overhauled at some point.
It is now £5k pa more, as pensions have gone up year by year but working incomes haven't due to pay freezes etc.