Increase In Income Tax

[gramps85]

I have just received my Income Tax Assessment for 2025-2026, and it shows my personal allowance has decreased by £450. Last tax year I was allowed to have an income of £450 more before paying tax. This means that any increase in my retirement pension will just be paid back in tax.  So much for a Government of lower taxation. Thanks very much Reeves and Starmer.

[newmodarmy]

Yes, although it's not specific to pensioners- lots of lower paid staff will get dragged into tax too and average tax rates are growing for all. Tories started the allowance freeze but Labour has kept the freeze and extended it. No doubt it's all needed to pay for the 'black hole'...

[1581960]

I wasn’t aware that personal allowances had been reduced, why did this happen gramps?

[ToraToraTora]

they have to get the £13.7bn to give to foriegners from somewhere:

https://www.theanswerbank.co.uk/News/Question1889694.html

 

[gramps85]

19.40. I have no explaination, except that I know I will be worse off in 2025 -2026. I have written to my local Labour MP to ask why? I expect I will eventually receive a reply spouting the Party rubbish, probably because of the fictisous 'Black Hole'.

[newmodarmy]

Personal allowance may have reduced because of state pension rise

[New Judge]

"I wasn’t aware that personal allowances had been reduced, why did this happen gramps?"

They haven't.

Assuming gramps is in receipt of a State Pension, that will be increased from April by 4.1%. That's about £400 ona £10k pension.

The State Pension is paid free of income tax but forms part of your taxable income. HMRC recover the ax due by reducing your personal allowabce by the amount of your pension.

So if your pension increases by £450pa your personal allowance will reduce by that amount. It means you will pay £90 more tax next year, which well be deduced from any other income you have.

[douglas9401]

Phew! Let's see if we can talk gramps down from the ceiling now.

[1581960]

If your income goes up and personal allowances stay the same you obviously pay tax (at whatever rate your on) on the additional income.

It's wrong to say "my personal allowance has decreased"

[New Judge]

It's wrong to say "my personal allowance has decreased"

It's not wrong.

HMRC recovers tax due on State Pension payments by reducing the recipient's personal allowance.If the State Pension goes up, that allowance will decrease.

[gulliver1]

🤣Gramps. Looks like you have been caught out again then 🤣

[THECORBYLOON]

"This means that any increase in my retirement pension will just be paid back in tax."

If your State Pension increases by X, the taxable amount increases by X, not the amount of tax you have to pay.

[THECORBYLOON]

I assumed you were already paying tax on your income for this year.

[1581960]

It's wrong to say "my personal allowance has decreased"

It's not wrong.

HMRC recovers tax due on State Pension payments by reducing the recipient's personal allowance.If the State Pension goes up, that allowance will decrease.

21:07 Mon 17th Feb 2025

 

It is wrong!!! You can take it out of one pocket and put it in another but he is still allowed the same amount of tax free income next year as he had this year.

His personal tax allowance is exactly the same as last year and has NOT BEEN REDUCED.

[Canary42]

Finding reality a bit difficult ?

Just label it fictisous [sic] and put your head back in the sand.

[newmodarmy]

So is it better to say the tax code has been reduced then? Still the same impact.

[New Judge]

"It is wrong!!! You can take it out of one pocket and put it in another but he is still allowed the same amount of tax free income next year as he had this year.

His personal tax allowance is exactly the same as last year and has NOT BEEN REDUCED."

I think you need to take a deep breath.

The current personal allowance for income tax purposes is £12,570.

If you receive a State Pension of (say) £10,000, your personal allowance is reduced to £2,570. That is what the OP is questioning here and that is the explanation for his allowance being reduced.

When HMRC inform you of this (by way of a revision to your tax code) it clearly says, in the “explanatory notes”, that your personal allowance is being reduced for that reason. You have already received £10,000 tax free and you only have a further £2,570 left to enjoy free of tax.

So I agree - his total tax free income remains the same. But the amount he can receive beyond his State Pension is what he is interested in for the purpose of his question. That is what his tax code tells him and that is the purpose of his question.

Your pedantry does not help him understand the answer to his question.

[vulcan42]

Each time I get an increase in my pension I get a letter from HRMC saying 20% of the rise will be transferred to my other pension and consequently the tax deducted on that pension increases. 

[THECORBYLOON]

NJ, the problem is  he is under the impression the entire £450 increase will be taken off him as tax whereas it is only £90 if he pays tax at twenty per cent and is already paying tax.

[gramps85]

Thank you all for helping me out. I now realise the mistake I made in my calculations. Thank you for putting my mind at ease, but when you are getting on a bit you can, as gulliver points out, be caught out.

Sorry for not replying before but I had an appointment with 2 or 3 pints of Fullers London Pride. Delicious.

[DDIL]

Hope you have recalled your complaint to you MP!