Income Tax

[Denisdiamond]

Although my girl friend has just celebrated her 60th birthday, she has decided to carry on working at the job she has been in for the last seven years on a full time basis. She earns approx. �12K per annum and her state pension is about � 110 per week. My question is, will she pay any income tax on her pension?

[Ethel]

Yes - state pension is subject to income tax.

[Loosehead]

she will have a tax free allowance, anything above that is subject to tax in the normal way.

[auzzie]

In order for your girlfriend to pay tax on her state pension it will need to be coded out by the tax office. Her tax free allowances for 2006/2007 are �5035. They will take off her pension which is (�110 x 52 wks) which comes to �5720. This will give her negative allowances and in order to collect the correct amount of tax due on her state pension and her earnings the tax office will probably put her on a "k" code which will collect tax at a slightly higher rate. They will send an explanation of this to her.