Tax thresholds have been frozen for some time and, when you couple that with big increases in the state pension, it means that many pensioners are being dragged into the tax arena, possibly for the first time since retirement.
Where pensioners have no PAYE income from a source such as a private pension, this causes a problem as there is no income from which tax can be collected at source. An increasing number of pensioners will be over the tax threshold purely on their state pension alone. There is no automatic method of collecting the tax owed at source, meaning state pensions are paid in full. As a consequence, these pensioners will face receiving tax demands after the end of the tax year.
HMRC will issue simple assessments to collect the tax and, where the pensioner is not aware of this, they will receive an unwelcome and unexpected tax demand.
The income tax threshold is £12,570, meaning anyone receiving a state pension over £242 per week would owe some income tax.
Pensioners should not ignore the letter from HMRC if they receive one. If they think any information in the letter is wrong or they cannot pay their bill on time, they must contact HMRC within 60 days.
If you know anyone in this position who needs advice, please ask them to get in touch with our director, Heather, who will be pleased to help.
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