Pension

[TheOtherHalf]

If I continue to work after claiming my State Pension next Feb, will I have to pay tax on the joint amount of earnings and pension ?or is my pension tax free ?

[Connemmara]

others will be on soon - you will good answers. I know some of the answers but wouldn't be 100%.

[TheOtherHalf]

thanks Connemmara. Will keep checking back. I have to make a decision soon about whether to claim it or defer it

[Fitzer]

You will have to pay tax if your combined earnings and pension are above the threshold, so if your pension was £10000pa & you earn £10000pa then your total income is £20000, that, less the allowance (I think it's around £10000 for a person in receipt of state pension) will be your taxable income. The only snag is that they can't/don't take tax from the state pension at source so they take it all from your other income :-( You really could do with professional advice, deferring the state pension means you get more per week when you do take it but it can depend on how healthy you are as to whether the risk outweighs the benefits etc etc.

[heathfield]

Have a look here...

http://www.hmrc.gov.uk/pensioners/paying-employed.htm

[TheOtherHalf]

thanks Fitzer, well explained. I might have a word with our works pension officer
Thanks again

[TheOtherHalf]

thanks Heathfield, thats very interesting. Will take a bit of time to digest it all

[boxtops]

The way it works for me (and I do recommend this) is that you speak to your tax office as soon as you've retired. The way they have set it up for me is that my state pension is tax free, but I am paying basic rate tax for the rest of this financial year on all other income. They will then sort out the detail after 5 April, to see if if I've paid too much (or too little) overall.

The intention is to pay you the State Pension full amount, without fiddling about with tax on it, but it is included in the calculation for your overall income p.a.

[boxtops]

^^ and I agree with heathfield. If you defer the state pension you currently get an extra 10.4% for every year you defer (like I did) - whether you choose to do that depends on your current tax position. Had I taken mine I would have been well into 40% tax-land and I wasn't prepared to do that, so I deferred it, only starting to take it earlier this year. Some say it's not worth deferring, but personally, I think it was.

[TheOtherHalf]

thanks all. lots to think about

[boxtops]

There IS lots to think about. I drew up a schedule of all possible options, and bounced it off a few people (including colleagues who know about payroll and tax) - it was quite a decision to make in the end. Your final decision as to whether to defer State pension or not may depend (e.g.) on how much you earn at the moment.

Don't forget that once you reach pensionable age, you need to apply for an Exemption Certificate so that you don't have to pay NI any more - you might want to do that now, so your payroll department have it in good time for your due date.

Also don't forget you are eligible for senior rates on the train if you buy a senior railcard, and get your bus pass - I don't pay a bean to go to work. by going on the bus these days!