State Pension: Is the State Pension taxable?

State Pension is a regular payment from the Government for most retired workers in Britain. To claim, you must have reached State Pension age, which depends on when your were born. The amount you receive also depends on how many years of National Insurance contributions you’ve made.

Is the State Pension taxable?

Yes, you will have to pay tax on some of your State Pension.

You pay tax if your total annual income adds up to more than your Personal Allowance.

You may also have to pay Income Tax at a higher rate if you take a large amount from a private pension.

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Your total income could include:

  • the State Pension you get (either the basic State Pension or the new State Pension)
  • Additional State Pension
  • a private pension (workplace or personal) – you can take some of this tax-free
  • earnings from employment or self-employment
  • any taxable benefits you get
  • any other income, such as money from investments, property or savings

State Pensions you receive are treated as earned income for income tax purposes.

However, you are no longer liable to pay any further National Insurance contributions once you have reached State Pension age.

The amount of income tax that you pay depends on your gross income.

You don’t pay any income tax on your gross income up to your Personal Allowance, which for 2020/21 is £12,500.

The amount of tax you pay depends on your total income for the year and your tax rate.

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How is tax collected from my State Pension?

The State Pension is taxable, but you receive it gross.

This means no tax is deducted before it’s paid to you from the State Pension.

HMRC may collect any tax due on your State Pension through the Pay As You Earn (PAYE) system if you have another source of taxable earned income, such as a private pension or employment income.

How to claim State Pension

You can claim your State Pension even if you carry on working.

There are 3 ways to claim the basic State Pension:

  • over the phone
  • download the State Pension claim form and send it to your local pension centre
  • claim from abroad including the Channel Islands

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