Published On: Wed, Jun 12th, 2019

Tax on pension UK: Are state pension and Pension Credit payments taxable? | Personal Finance | Finance


Income tax is payable on a number of things, with earnings, most pensions, and income from a trust all taxable. It’s not a requirement to pay tax on some forms of income. This includes some state benefits, dividends from company shares under dividends allowance, and premium bond or National Lottery wins. Pensioners may wonder whether they have to pay tax on their state pension income and Pension Credit payments.

The government website states that the state pension is taxable.

Income tax also applies to most company and personal pensions, most retirement annuities, pensions paid by the Industrial Death Benefit scheme, and the Widow’s pension.

Some types of state benefits which a pensioner may receive are tax-free.

This includes Pension Credit, and War Widow’s Pension.

The Personal Allowance means that income up to £12,500 has a zero per cent tax rate.

A tax code can take account of the taxable state benefits, meaning any tax owed is usually automatically taken from other income.

The government advise: “If the State Pension is your only income, HM Revenue and Customs (HMRC) will write to you if you owe Income Tax.

“You may need to fill in a Self Assessment tax return.”

Pension Credit made headlines this week, as it was revealed that those who claim the benefit and are over the age of 75 will be able to get a free TV licence.

It came as BBC confirmed that it would not be continuing a scheme currently funded by the government, which ends in June 2020.

The broadcaster has said taking over the scheme would have cost it £745 million in 2021/22 – a fifth of its budget.

However, the TV licence will be means-tested for those over the age of 75.

This means that those claiming Pension Credit and have reached this age will be eligible for a free TV licence.

“Under the new scheme, anyone aged 75 or over who receives Pension Credit will still be eligible for a free TV Licence which the BBC will pay for,” a notice on the TV Licensing website reads.

“Households where there is no one aged 75 or over that receives Pension Credit will need to buy a licence if one is needed.”

Anyone who is currently getting the free TV licence for over 75s will be covered until May 31, 2020.

The TV licensing website states that they will be writing to those currently on the scheme ahead of May 31, 2020, informing them that they may be affected – as well as advising them in “what they will need to do”.

The Department for Work and Pensions (DWP) have said that there is currently an overall take-up in Pension Credit of 60 per cent.

Furthermore, more than a million people are entitled to the benefit, and yet are not claiming it.

The government website has more information on free and discounted TV licences at gov.uk/tv-licence, and here, it’s also possible to apply for one.



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