HMRC Flags Alert for State Pensioners Exceeding £12k Earnings
The HMRC has issued a warning for state pension recipients whose earnings may surpass £12,000, potentially putting them into a higher tax bracket. This alert comes as the government considers increasing the state pension by £460 next year. Pensioners could find themselves liable for income tax if their annual pension breaches £12,003.68, just below the current tax-free threshold of £12,570.
According to former Liberal Democrats pensions minister Sir Steve Webb, around three in four UK pensioners may face income tax payments next year, with over 300,000 being pulled into the taxable bracket for the first time since retirement. Income exceeding £12,570 incurs a 20% tax rate, climbing to 40% between £12,570 and £50,270, and further rising to 45% for incomes over £125,140.
Webb highlighted the substantial disparity in pension amounts received by seniors, estimating that over 2.5 million pensioners, more than one in five, have pensions exceeding the income tax threshold. Chief Executive of Independent Age, Joanna Elson, expressed concern for low-income pensioners facing potential income reductions, especially amid confusion regarding tax obligations. Many elderly individuals are worried about the impact of paying taxes on their already limited incomes.
This tax rise alert serves as a reminder for state pensioners to assess their earnings carefully and be prepared for potential tax liabilities if their income surpasses the £12,570 threshold. As discussions continue on the potential increase in state pension next year, pensioners are advised to stay informed and seek guidance on managing their finances accordingly.