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In one hand and out from the other - State Pension.

2oldcodgers

Not sure if this post is in the right place.
Received notification yesterday that my state pension is going up by 10.1% - great news!
I'm on the old style pension - retired in 2014 age 65.
I am to get £13,392 a year from April which the tax man has informed me is £822 more than my personal tax allowance.
In addition I also receive 5 private pensions.
I am to pay, according to the tax man, tax at 20% on all of my private pensions with one of them being taxed at 20% + £822 of income being assessed as a debt!

In approximate terms my state pension is going up by £1228 (last year it was £12164 which was below my tax allowance)
So of the increase I am to now pay tax @ 20% on the excess £822 + further tax on £406

So because of the increase of £1228 (10.1%) I am to pay a total of £245.60!!
This cannot be right as the 10.1% cash in my pocket is now only a rise of 7.2%!!

Surely this cannot be right?

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Comments

Cartini

The personal allowance is £12570; any income above this is taxable unless any of it is non-taxable (War Pension for example).

Following the uplift in April, and as you have been advised, your state pension is more than your personal allowance, which means your private pensions will then be taxable.

I`m assuming £406 is the total of your private pensions, so the tax for £406 will be £81.20 and the tax for £822 will be £164.40, the total tax being £245.60.

So yes, this is correct.

You are having an uplift of £1228 in April, which means you are still £982.40 a year better off than last year which, in my book, is better than a slap in the face with a soggy kipper.

calcotti

2oldcodgers said:£1228
So because of the increase of £1228 (10.1%) I am to pay a total of £245.60!!
This cannot be right as the 10.1% cash in my pocket is now only a rise of 7.2%!!

Surely this cannot be right?

Of course it’s correct, that’s how tax works. Once you are over the tax free threshold you pay tax on any additional taxable income.

ShirleyW

@2oldcodgers are you married?
If you are does your wife's income use all of her personal tax free allowance or is there some leftover?

If there is some left over she can transfer part of it to you. See this link: https://www.gov.uk/marriage-allowance

If your wife decides to go ahead with this please do NOT get a third party firm to do it for you. They will charge you a huge commission and take it out of any tax refund. Your wife can do it herself using the .Gov application forms.

calcotti

KShirleyW said:

@2oldcodgers are you married?
If you are does your wife's income use all of her personal tax free allowance or is there some leftover?

If there is some left over she can transfer part of it to you. See this link: https://www.gov.uk/marriage-allowance

Good suggestion.

2oldcodgers

calcotti said:

2oldcodgers said:£1228
So because of the increase of £1228 (10.1%) I am to pay a total of £245.60!!
This cannot be right as the 10.1% cash in my pocket is now only a rise of 7.2%!!

Surely this cannot be right?

Of course it’s correct, that’s how tax works. Once you are over the tax free threshold you pay tax on any additional taxable income.

I agree but I understood it to be that we would all (pensioners) get the equivalent of a 10.1% rise in our pockets. My 10.1% rise of £1228 is only worth £982 in my pocket. I still think that I have been cheated with all of this.
Looking forward to next year and with the personal allowance still being frozen any increase that I get next year the taxman will want his 20% of that increase!
I have worked, paid exorbitant amounts of tax and national insurance for 49 years without a break, paid into 5 private pensions as well all at the expense of my health and very few holidays or time off only to find that I end up paying this tax on my Old Age pension. I don't mind paying tax on my private pensions but object to paying it on the State Pension.
I might as well have not bothered to save and spent the money on holidays, cars clothes etc. I should have worked for £10ph, had no stress no heart issues instead of my salary of well in excess of £100,000pa back in 1990
Sorry I am having a rant please ignore me.

2oldcodgers

ShirleyW said:

@2oldcodgers are you married?
If you are does your wife's income use all of her personal tax free allowance or is there some leftover?

If there is some left over she can transfer part of it to you. See this link: https://www.gov.uk/marriage-allowance

If your wife decides to go ahead with this please do NOT get a third party firm to do it for you. They will charge you a huge commission and take it out of any tax refund. Your wife can do it herself using the .Gov application forms.

Yes married, she gets her State Pension based on my contributions something like 60% of basic State Pension £80 a week?
She has no savings, pensions or other sources of income.

ShirleyW

2oldcodgers said:

ShirleyW said:

@2oldcodgers are you married?
If you are does your wife's income use all of her personal tax free allowance or is there some leftover?

If there is some left over she can transfer part of it to you. See this link: https://www.gov.uk/marriage-allowance

If your wife decides to go ahead with this please do NOT get a third party firm to do it for you. They will charge you a huge commission and take it out of any tax refund. Your wife can do it herself using the .Gov application forms.

Yes married, she gets her State Pension based on my contributions something like 60% of basic State Pension £80 a week?
She has no savings, pensions or other sources of income.

So there is no reason why she can't transfer the Married Allowance portion of her tax free personal allowance to you.

From memory I think the amount of Personal Allowance transferable is £1,260.

Checkout the link I posted above.

For the benefit of other people reading the thread there is no point doing this if you both pay income tax. It is only a saving if one person in the marriage or civil partnership has spare tax free personal allowance.

calcotti

2oldcodgers said:
I agree but I understood it to be that we would all (pensioners) get the equivalent of a 10.1% rise in our pockets. My 10.1% rise of £1228 is only worth £982 in my pocket. I still think that I have been cheated with all of this.

You may have understood that but that is a misunderstanding. What you are getting is a 10.1% in the increase of the SP.

Even if they wanted to it would be impossible to give everybody a 10.1% increase of the net income because everybody has different circumstances.

2oldcodgers said:
Looking forward to next year and with the personal allowance still being frozen any increase that I get next year the taxman will want his 20% of that increase!

True. The freezing of the tax threshold will impact many pensioners - some of whom may only receive a State Pension. That adds the further complication that tax is never deducted from State Pension payments so people affected will get unexpected bills which they will have to pay.