Self assessment and pensioners
Discussion
The budget announcement on the pensioner tax allowance seems to have removed the threat of paying income tax if your only income is the new state pension.
However, has it pushed all pensioners who do have other incomes into doing a self assessment and potentially having a tax bill every year?
The new rules say that the pensioner tax allowance will be "clawed back at the rate of £1 for every £3 of income above the limit".
Will this claw back be done by self assessment, or by imposing a negative tax code on incomes that are taxed at source (company/private pensions etc.)?
What about incomes that are currently exempt from tax, like the £1000 savings interest allowance, or the £3000 trading allowance?
Will this be subject to the clawback?
My mum, 89, gets state pension, topped up by pension credit.
She also gets £200 a month as a widows pension from dad's company pension, taxed at source.
Will she have to do a self assessment to pay the clawback of the pensioner's allowance?
I'm also wondering if I'll be stuck doing self assessment until I die, as I get the state pension, and two company pensions totalling around £12k a year (taxed at source).
I currently do self assessment as I'm still working, sole trader. I'm planning to pack that in in a year or two, and was expecting that to be the end of self assessment.
I currently do my own self assessment, and mum doesn't have to.
Madness if pensioners who can't handle their own tax returns have to pay an accountant hundreds of pounds just to pay a few quid of tax.
It would be far more sensible to make the pensioners tax allowance universal (no clawback), or just tax the state pension at source. Even better, put the personal allowance up for everybody.
However, has it pushed all pensioners who do have other incomes into doing a self assessment and potentially having a tax bill every year?
The new rules say that the pensioner tax allowance will be "clawed back at the rate of £1 for every £3 of income above the limit".
Will this claw back be done by self assessment, or by imposing a negative tax code on incomes that are taxed at source (company/private pensions etc.)?
What about incomes that are currently exempt from tax, like the £1000 savings interest allowance, or the £3000 trading allowance?
Will this be subject to the clawback?
My mum, 89, gets state pension, topped up by pension credit.
She also gets £200 a month as a widows pension from dad's company pension, taxed at source.
Will she have to do a self assessment to pay the clawback of the pensioner's allowance?
I'm also wondering if I'll be stuck doing self assessment until I die, as I get the state pension, and two company pensions totalling around £12k a year (taxed at source).
I currently do self assessment as I'm still working, sole trader. I'm planning to pack that in in a year or two, and was expecting that to be the end of self assessment.
I currently do my own self assessment, and mum doesn't have to.
Madness if pensioners who can't handle their own tax returns have to pay an accountant hundreds of pounds just to pay a few quid of tax.
It would be far more sensible to make the pensioners tax allowance universal (no clawback), or just tax the state pension at source. Even better, put the personal allowance up for everybody.
MTD is for sole traders and landlords only - currently with GRoss Income of £50,000 or over.
Self Assessment covers similar ground plus lots of other eventualities.
If your "other" source of income over and above the Sytate Pension is an Employment and/or a job related pension, then any taxes due on the State Pension are collectable through the other pensions by adjusting your PAYE Coding. This has been the case for many years.
Self Assessment covers similar ground plus lots of other eventualities.
If your "other" source of income over and above the Sytate Pension is an Employment and/or a job related pension, then any taxes due on the State Pension are collectable through the other pensions by adjusting your PAYE Coding. This has been the case for many years.
Eric Mc said:
MTD is for sole traders and landlords only - currently with GRoss Income of £50,000 or over.
Self Assessment covers similar ground plus lots of other eventualities.
If your "other" source of income over and above the Sytate Pension is an Employment and/or a job related pension, then any taxes due on the State Pension are collectable through the other pensions by adjusting your PAYE Coding. This has been the case for many years.
So you think a "negative" tax code would be applied to the company/private pension to claw back the tax due on the state pension?Self Assessment covers similar ground plus lots of other eventualities.
If your "other" source of income over and above the Sytate Pension is an Employment and/or a job related pension, then any taxes due on the State Pension are collectable through the other pensions by adjusting your PAYE Coding. This has been the case for many years.
Do you also think that the £1000 savings interest allowance would fall outside of the scope of the pensioner's allowance clawback?
Same for the £3000 trading allowance?
My plan is to basically retire when I'm 71 in 18 months, and not take on work for new customers.
I will continue to do some work for existing customers - I like to provide a goodwill service for a couple of years beyond the 12 month written guarantee.
I'd expect it to become basically a hobby for pocket money, turnover below £3k.
It would be nice if this was outside the tax system, and there was no requirement to do a tax return.
clockworks said:
So you think a "negative" tax code would be applied to the company/private pension to claw back the tax due on the state pension?
Do you also think that the £1000 savings interest allowance would fall outside of the scope of the pensioner's allowance clawback?
Same for the £3000 trading allowance?
My plan is to basically retire when I'm 71 in 18 months, and not take on work for new customers.
I will continue to do some work for existing customers - I like to provide a goodwill service for a couple of years beyond the 12 month written guarantee.
I'd expect it to become basically a hobby for pocket money, turnover below £3k.
It would be nice if this was outside the tax system, and there was no requirement to do a tax return.
That's how it works already.Do you also think that the £1000 savings interest allowance would fall outside of the scope of the pensioner's allowance clawback?
Same for the £3000 trading allowance?
My plan is to basically retire when I'm 71 in 18 months, and not take on work for new customers.
I will continue to do some work for existing customers - I like to provide a goodwill service for a couple of years beyond the 12 month written guarantee.
I'd expect it to become basically a hobby for pocket money, turnover below £3k.
It would be nice if this was outside the tax system, and there was no requirement to do a tax return.
However, the UK tax system is now VERY complex with multiple allowances, tax rates and exemptions for different classes of income. This makes predicting what to do with tax codes very complicated and messy and very often, wrong.
So, maybe completing a Self Assessment tax return mighty be a useful exercise in order to INSTRUCT HMRC what the correct figures are. Otherwise HMRC are faffing around with guesses and estimates.
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