You do pay tax on your state pension, unless your total income is below your personal tax allowance. Tax is not deducted by the Department of Work and Pensions (DWP) before it’s paid to you so HMRC will work out how much tax is due and how it will be collected.
What if my state pension is less than my personal tax allowance?
If your only income is your state pension which is less than your personal allowance, then you will not need to pay tax. Here is information on what the current personal allowance is.
What if my state pension is more than my personal allowance?
If your State Pension is more than your personal tax allowance but you do not have any other source of income, then HMRC will send you a PA302 calculation, known as a Simple Assessment.
You need to check that the figures provided by HMRC match with yours. If the figures don’t match, you must contact HMRC within 60 days so that they can amend the calculation of how much tax is due. If you have other income that HMRC are not aware of, such as dividend income, you should let them know within the 60 day period. If you don’t contact them, the amount shown on the PA302 will become payable. You will then have to pay the tax by the following 31st January.
If you can’t afford to pay in one lump sum, contact HMRC straight away. Late payment interest can be charged after the payment deadline, so it’s best to contact them as soon as possible to get the issue sorted.
If you think you should have received a Simple Assessment but haven’t, contact HMRC.
If you need help you can also call our helpline.
What if my state and private pensions are more than my personal tax allowance?
You may have a pension that you paid into while you were working (known as an occupational pension). If that and your state pension take you over the personal tax allowance then you will have to pay tax.
The tax on private or occupational pensions will be taken away (deducted) by your pension provider and paid to HMRC. They will also deduct the tax owed on your State Pension if they have been instructed to by HMRC. In this way, the tax on both your state and occupational pension will be deducted from your occupational pension. In most cases there should be no extra tax to pay at the end of the year, but this depends on the amount you receive from your other pension.
Do I pay tax on pension credit?
Pension credits are not taxed.