Pension Tax

[peterbaz]

To all the over 65s...come January I retire and am eligible for the full state pension. I currently have a private pension and am working part-time. I pay tax on both incomes. What way will my tax work when I receive the state pension?

Thanks folks x

[Jackdaw33]

It will probably come off your private pension, mine does.

[sunny-dave]

The state pension is taxable, but is paid without tax being deducted - your tax code will be adjusted so that the extra tax is taken from one of your other incomes.

[fiction-factory]

Whether you will pay more tax or not depends on whether your tax code is currently correct. If you are currently paying tax at 20% (assuming you are not in 40% tax bracket) and have had tax deducted on the full amounts because you have aBR code or equivalent then if you've had no other income you will have been overpaying tax. If, on the other hand, your tax allowance was applied correctly on your private pension income then your tax code will be adjusted to reflect the additional income from teh state pension. It may take a bit for things to settle down though.

[ToraToraTora]

total income will be taxed according to the rules.

[New Judge]

Your annual tax-free allowance (currently £10,600) will be reduced byy the amount of your State pension. So, if your State pension is £5,000pa your tax free allowance will go down to £5,600. Bear in mind that ou will only receive about three months State pension in the current tax year so, in my example above, your tax free allowance will be reduced by about £1,250.