Retirement can bring lots of changes. One of those is how you pay your tax. It might feel complicated but we’ve got information and advice to help you navigate this new chapter in your life.
You have to pay tax on your State Pension, but nobody takes tax from it
Sounds confusing? Let’s explain.
The State Pension is paid to you from the Department of Work and Pensions (DWP), but they don’t take the tax when they pay it to you. Instead, HMRC (the government department that collects tax) takes it from other sources, like payments from occupational pensions or wages.
Find out more about how the State Pension is taxed.
Different sources of income can make things complicated
When you retire, your income might come from different places. These can include your State Pension, occupational pensions, part time work, and other savings or investments.
Each source may be taxed differently, so it’s important to understand how they interact.
Find out more about paying tax on different sources of income.
Look out for overpayments or underpayments
If your money comes from different places, it can be easy to pay too much or too little tax. HMRC will send your information about what tax code they’re using. It’s important to check your tax code and make sure all your sources of income are included.
Find out more about paying tax on different sources of income and <strong><u>how to get a refund if you’ve paid too much tax.
Tell HMRC you’ve retired
The year you retire is when HMRC systems are most likely to struggle with changes. Let them know about your retirement and the changes to your income.
You can email, write a letter, phone them or use your personal tax account if you have one (it is free to register). Find out more about contacting HMRC. Keep a copy of any emails or letters you send or make a note of the time and date of your phone call and who you spoke to.
Give your P45 to your pension provider
When you stopped work, you will have been given a P45 from your last employer. It will show how much you have earned, how much tax you have paid that year (since 6 April), and what tax code your employer has been using. Give your pension provider the P45 so that they can use the code number from it.
Keep everything HMRC sends you
Keep all HMRC correspondence, especially anything that has information about the tax code they’re using for you. You should check your payslips or pension notifications to make sure the tax code your employer or pension provider is using is correct.
You should get a P60 by May 31 each year. This shows you how much you have been taxed on your salary or occupational pension.
Ask for help
Managing your pension tax can feel daunting, but support is available. Find out who to contact for support.