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ChatterBank0 min ago
I'm going to get my state pension in 2026 which will be a bit more than £11,500 per year. The tax allowance is approx a thousand pounds more than that. Just want to make sure this is right: If I earn a couple of thousand pounds over my tax allowance when I'm drawing my pension, will my pension, plus earnings be lumped together to be taxed at 20% ? Hence the call to raise the allwance to £15,000. It's like the pension has been designed to be beneath what anyone can live on, forcing them to continue working so that the government will recoup a chunk of the state pension. Have I got that right? probably better then to not work at all and claim for any top-up benefits that I might be able to get when I get my pension.
"If I earn a couple of thousand pounds over my tax allowance when I'm drawing my pension, will my pension, plus earnings be lumped together to be taxed at 20% ?"
Alhough not taxed at source, the State Pension forms part of your taxable income. Most people have a tax free allowance (currently £12,570). So in your scenario, you will pay tax on (£14,570 - £12,570) which equals £2,000. At 20% this means you will pay £400 tax.
To receive "top ups" (by which I assume you mean Pension credit) you must have an income of less than £11,344. So your State Pension alone will take you beyong the qualification level for Pension Credit.
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There will probably be other benefits you can claim
I think from his, "Hence the call to raise the allwance to £15,000." and "couple of thousand pounds over my tax allowance" he means his pension plus earnings would be below £15,000 and not taxable
Even if the personal allowance were raised to £15,000, there would be pensioners taxed still because of income above that figure.
Are those calling for a £15,000 threshold wanting that only for pensioners or do they want it for everyone?
NEW JUDGE: Thank you! I think I understand it now. I'll only be taxed on the income I earn that goes over my allowance. I wasthinking that I'd be taxed at 20% of my entire income including the pension!
If pension credit is only paid to people who have an income less than the state pension, I presume this is only for people haven't paid enough NI to receive the full pension.
CRAPATCRYPTICS2: I took out three private pensions over the years but they were worth as little as £200 per YEAR and I was in dire need of a new roof and a boiler so I cashed them in when I was 55
DAVEBRO 3 Sorry, I meant if I earned £2000 on top of my pension.
Many thanks for all the answers!
Tarser, sorry to point out that you are wrong. The 'new' state pension is approximately £220 a week if you have paid full NI contributions. The cut off for pension credit is £218 so they don't get it.
There are many people receiving the 'old' basic pension having paid full NI but they get only £169.50 a week so do get pension credit
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