State pension: Do you pay tax on state pension?

You pay income tax and National Insurance contributions for a long time, but does that stop when you retire? State Pensions that you received are treated as earned income for income tax purposes. Do you pay tax on State Pension?

Do you pay tax on state pension?

Yes, the State Pension is taxable income but you receive it gross.

However, you don’t need to pay any National Insurance contributions once you reach State Pension age.

HMRC may collect any tax due on your State Pension through the PAYE system if you have another source of taxable income.

This includes if you have a private pension or are still working and get an employment income.

If you continue to work, your employer will take any tax due off your earnings and your State Pension through PAYE.

If you get pensions from more than one provider, HMRC will ask one of your providers to take the income tax off your State Pension.

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No tax is deducted before your State Pension is paid to you, but if your total taxable income is greater than your allowances and reliefs then you have to pay tax.

You will pay tax on the income that exceeds your allowance, the standard personal allowance for the tax year 2020/21 is £12,500.

Your personal allowance may be less or more than this depending on a number of factors, but HMRC should tell you how much it is each time it changes.

You should each year that the correct amount of income tax has been taken off your State Pension and the other income you might receive.

HMRC may not be able to collect tax on your pension through PAYE, so you may need to complete a Self Assessment tax return each year, or HMRC may send you a Simple Assessment.

Check your coding notice to make sure you are paying the right tax on your pension.

If you receive more than one pension from the same pension provider, check that you have a code number for each pension.

Contact HMRC if you need clarification.

You should also check if you have a change of circumstances that affects the income you receive, such as retiring from work and receiving a lower income.

If you have had more tax deducted than you should have paid, you can reclaim the difference from HMRC using a repayment claim forms.

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Do you pay tax on your pension when you defer it?

During the period of State Pension deferral, you won’t pay any tax on your State Pension.

This is because you are not claiming or receiving your State Pension pension.

When you decide to stop deferring, you will receive a regular State Pension.

Those who defer may find they receive a higher amount than they would have if they hadn’t deferred it.

You can often choose between receiving extra State Pension income and a lump sum payment.

The additional State Pension income is taxable in the same way as the rest of your State Pension.

If you reached State Pension age before April 6, 2016 and choose to take

When can you claim the State Pension?

You can claim your State Pension when you reach State Pension age.

The State Pension ages have been changing dramatically since April 2010.

It is currently 65 but will be raised to 67 by 2028.

You won’t receive it automatically, you will have to claim it.

You can do this in one of three ways:
• 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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