HMRC warning for Brits who receive state pension as they could owe money
State pensioners may need to keep an eye on their coffers as earnings over £597 a year could lead to owing money to HMRC. Owing to April's 4.1 per cent increase under the Triple Lock - which adjusts payments according to inflation, wage growth, or a minimum of 2.5 per cent, whichever is higher - the state pension saw a bump.
Now, the full new State Pension stands at £230.25 weekly, totalling £11,973 annually, leaving recipients just £597 below the Personal Allowance threshold of £12,570. Any income over this allowance will be subject to a 20 per cent tax, climbing to 40 per cent beyond £50,270.
The Low Incomes Tax Reform Group is calling upon the DWP and HMRC to flag potential tax liabilities to pensioners nearing the threshold.
They've urged: "We think that DWP and HMRC should work together to ensure that pensioners are warned about possibly needing to pay tax on their State Pension in future. This should include setting out how the tax will be collected and the likely tax liability."
Suggestions have been made to incorporate these warnings within the annual State Pension notification letters dispatched by the DWP each spring before the April pension increases take effect, reports Birmingham Live.
BBC and ITV star Martin Lewis was questioned on his recent Sounds podcast: "Explain to me why any pensioner would want to increase their pension?
"You will be taxed 20 per cent over £12,570, which means you'll be worse off and you'll be asked to pay more in, you'd then have your benefits stopped if you're below the limit and that takes you below the limit and that takes you over the limit even by 10p."
Martin said: "Let me split that into two. Without being rude, on the first bit you're talking nonsense. Okay, look, tax in this country is marginal. You only pay 20 per cent on the amount above the threshold.
"The State Pension has always been taxable if you have other income, it counts as taxable income. So look, let's say you add £1,000 a year to what you earn and that £1,000 is above the threshold.
"Yes it's taxed so you only get £800 of it. But you still get £800 more. Tax is marginal, you always want to earn more, you always receive more if you earn more.
"You might not get every pound more that you're being given but you're still, the more you earn the more you get, so the tax thing, that's a red herring."
He added: "The other one isn't - for those on very low incomes if you may be eligible for Pension Credit and you don't have any other income, the Pension Credit effectively tops you up to the full State Pension anyway so if you're gonna buy years to top you up to the full State Pension a it is possible that you would have simply got it via pension credit anyway."
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