State pensioner faces ‘big’ tax bill - HMRC explains how rules work
They wanted to know how their allowances worked.
A person about to start claiming their state pension contacted HMRC to ask how their payments would be taxed.
The individual got in touch over X to ask say they were soon to start claiming their state pension and were already receiving a pension.
They asked: "Are both annual amounts added together minus tax allowance to get amount that is taxed at 20 percent?"
HMRC said in response: "State pension is not taxed at source, we adjust the tax code to collect the tax due.
"When we get information of your state pension from DWP, you'll receive a new tax code notification."
People can currently begin claiming their state pension when they turn 66, although there is the option to defer this if you choose.
The person asked HMRC to further clarify the rules, adding: "So basically 20 percent of my state pension amount is taken off my tax code?"
A representative of the tax body replied to confirm this would be the case.
Don't miss...
HMRC state pension warning as you may need to act to get full amount [STATE PENSION]
Customer's anger as cash machine ‘steals her money’ [ATM]
Premium Bonds warning as technical glitch could block you from cashing in [SAVINGS]
The person replied again to check some calculations they had made about their finances.
They said: "Just checking, 20 percent of my state pension is £2,146 ( not full state pension ), so £13,830- £2,146 = £11,684 which would be new tax code? When calculated against both pensions it seems a big rise for just the £2,146 extra.
But HMRC was taciturn in its response. A representative said: "You'll need to wait till your new tax code is calculated, this will happen after your state pension starts and we get the info from DWP."
The full new state pension is currently £221.20 a week, or £11,502.40 a year. A person typically needs 35 years of National Insurance contributions to get the full amount.
Those soon to retire may want to check exactly when their state pension age is, as it will be gradually increasing from the current 66 to 67 between 2026 and 2028.
Legislation is also in place for the age to increase again from 67 to 68 between 2044 and 2046, but there have been discussions about bringing forward this increase.
The Government is set to review the state pension age within the first two years of this Parliament.
For the latest personal finance news, follow us on Twitter at @ExpressMoney_.
