Millions of people over State Pension age set to pay income tax due to frozen Personal Allowance
24.04.2024 - 09:51
/ dailyrecord.co.uk
Retirement expert Adam Pope from Spencer Churchill Claims Advice has warned that nearly two million people over State Pension age will feel the financial impact of the freeze on the Personal Allowance within the next four years. The latest figures from the Department for Work and Pensions (DWP) show there are nearly 12.7 million people over State Pension age across Great Britain, including more than 1.1m living in Scotland.
However, of that overall total, some 8.1m (64%) currently pay tax in retirement, largely due to additional income from workplace or private pensions on top of their State Pension. Spencer Churchill predicts nearly 900,000 more people will exceed the Personal Allowance threshold of £12,570 over the current financial year, with the further 2m expected before the freeze ends in 2028.
It’s important to be aware that older people whose sole income this year is the State Pension will not pay tax, and anyone with additional income who does not pay HM Revenue and Customs (HMRC) directly through earnings, will not receive a tax bill until June or July 2025, which must be paid by the end of January 2026.
The full New State Pension is now worth £221.20 each week and as payments are typically made every four weeks, this amounts to £884.80 each pay period. Over the 2024/25 financial year, this is an increase of £902, taking the annual income from State Pension alone from £10,600 to £11,502.
This leaves just £1,068 before the personal tax threshold is exceeded, so anyone with additional income of £89 or more per month - on top of State Pension - may receive a tax bill the following year.
Someone on the full rate of the Basic State Pension will receive £169.50 each week - this amounts to £678 each pay period. Over