From April 2023, Government awarded State pensions a 10.1% increase known as the triple lock guarantee.
If you retired after 6 April 2016 when the State pension was reformed the full” new” rate now stands at £203.85 per week (£10,600 a year), if you retired prior to 6/4/2016 and in receipt of the “old” Basic State pension, the full rate is £156.20 a week (£8,122 a year).
Everyone is entitled to a Personal Allowance (unless you are a very high earner) of £12,570 (2023/24), which means that you can earn up to this amount without having to pay any tax.
If you do have income from other sources however, for instance a private or workplace pension or employment and your total income exceeds your Personal Allowance, you will have to pay tax and HMRC is able to collect the tax that is owed from one of these other sources, via a PAYE code.
A problem that could potentially occur going forward however is that if you are in receipt of a “large” State pension -with no other income source-which exceeds your Personal Allowance, HMRC will not be able to automatically deduct the tax that is due.
It was confirmed in the Chancellor’s Autumn Statement on 22nd
November 2023, that the State pension will increase next year by 8.5%.This will take the new single tier pension to £221.20 a week, £11,502.40 a year, (the “old” State pension will increase to £169.48 a week, £8,812.80 a year).
Whilst this rise will still result in the old and new State pensions being just below the Personal Allowance threshold, if anyone receives a “large” State pension (for instance if they have a State Earnings Related Pension (SERPS) entitlement or State Graduated pension in addition to the normal rate of State pension), this could push them over the tax threshold which could cause a problem.
The issue here is that if you exceed your Personal Allowance threshold and HMRC cannot offset your tax against any other source of income, HMRC will write to you after the end of the tax year (after 5 April) and will ask you to pay the tax that is due before 31 January the following year.
For more information please access this link provided by the Low Income Tax reforms Group:-
Alternatively The Pension Service(part of the DWP) can help with pensions, benefits and retirement information at www.gov.uk
or phone 0800 731 7898.