Income tax is payable on a number of things, with earnings, most pensions, and trust income all taxable. It is not compulsory to pay tax on certain forms of income. This includes certain state benefits, dividends from company stock as dividend allowance, and bonus bond or national lottery winnings. Retirees may wonder whether they should pay taxes on their state pension income and pension credit payments.
The government website indicates that the state pension is taxable.
Income tax also applies to most company and personal pensions, most retirement pensions, pensions paid by the work death benefit scheme and widow’s pension.
Certain types of state benefits that a retiree may receive are tax exempt.
This includes the pension credit and the war widow’s pension.
The personal allowance means that income up to £ 12,500 is subject to a zero percent tax rate.
A tax code can take into account taxable state benefits, which means that any tax owed is usually automatically deducted from other income.
The government advises, “If state pension is your only income, HM Revenue and Customs (HMRC) will write to you if you owe income tax.
“You may need to complete a self-assessment tax return. “
Pension Credit grabbed the headlines this week as it was revealed that those claiming the allowance who are over the age of 75 will be able to get a free TV license.
It came as the BBC confirmed it will not be continuing a currently government-funded program, which ends in June 2020.
The broadcaster said resuming the program would have cost it £ 745million in 2021/22 – a fifth of its budget.
However, the TV license will be means tested for those over 75 years old.
This means that those who claim the pension credit and have reached this age will be entitled to a free television license.
“Under the new program, anyone aged 75 or over who receives pension credit will still be eligible for a free TV license which the BBC will pay for,” a notice read on the TV license website.
“Households where there is no one aged 75 or over who receives a pension credit will have to purchase a license if necessary. “
Anyone who currently obtains the Free TV for Over 75 license will be covered until May 31, 2020.
The TV Licensing website says they will write to those currently on the program by May 31, 2020, advising them that they may be affected – as well as advising them on “what to do.”
The Department of Work and Pensions (DWP) said there is currently an overall use of the pension credit of 60 percent.
In addition, more than a million people are entitled to the allowance without claiming it.
The government website has more information on free and discounted TV licenses at gov.uk/tv-licence, and here it is also possible to apply for one.