The state pension is a monthly payment, which can only be claimed once a person has reached state pension age. Currently, state pension age is rising, however it’s possible to check when one will reach state pension age online, using the government tool. The full new state pension is currently £168.60 per week, while the maximum basic state pension is currently £129.20 per week.

However, Pension Credit, which some pensioners will be eligible to claim, is not taxable.

How much Income Tax is paid each tax year depends on how much taxable income a person has above their Personal Allowance, and how much of their income falls within each tax band.

DON’T MISS

The current tax year began on April 6, 2019, and runs until April 5, 2020.

The standard Personal Allowance is £12,500, and if a person has this Personal Allowance, this is the amount of taxable income they do not have to pay tax on.

This means that any taxable income they have up to this rate is charged at a tax rate of zero percent.

The Basic rate band has a tax rate of 20 percent and covers taxable income from £12,501 to £50,000.

Taxable income of between £50,001 to £150,000 falls under the Higher rate band – and this is 40 percent.

The Additional rate is 45 percent, and this applies to all taxable income over £150,000.

Should a person have an income which is greater than £100,000, then they will start to lose their Personal Allowance.

It decreases by £1 for every £2 that one’s adjusted net income exceeds £100,000.

As a consequence, if a taxpayer has an income of £125,000 or more, then their Personal Allowance is zero and they will need to do a Self Assessment tax return.

Earlier this year, Royal London published figures showing that as many as 520,000 people are still earning money while claiming the state pension.

Sir Steve Webb, director of policy at Royal London, said: “If your earnings are enough to support you, it makes sense to consider deferring taking a state pension so that less of it disappears in tax.”

Source link