In a Parliamentary petition, the Labour Party government is implored to “i ntroduce new tax code for state pensioners with double the personal allowance”.
Labour told to introduce ‘new HMRC tax code’ for state pensioners
The Labour Party government has been told to introduce a “new” tax code for state pensioners. In a Parliamentary petition, the Labour Party government is implored to “introduce new tax code for state pensioners with double the personal allowance”.
The petition urges: ” We want the government to introduce a new tax code for state pensioners, set at double the basic threshold. If this was implemented, pensioners would receive a higher tax-exempt limit, but wealthier pensioners would still pay tax.”
It says: “We think that people with small private or workplace pensions are currently being taxed unfairly.” Your tax code is used by your employer or pension provider to work out how much Income Tax to take from your pay or pension.
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HM Revenue and Customs (HMRC) will tell them which code to use. State Pension income is taxable but usually paid without any tax being deducted.
You no longer have to pay National Insurance contributions when you’ve reached State Pension age. The amount of income tax you pay depends on your total annual income from all sources.
You only pay Income Tax once your total annual income is above your Personal Allowance. The standard Personal Allowance for the tax year 2024/25 is £12,570.
Your Personal Allowance might be more or less than the standard figure due to a number of other factors. HMRC should tell you how much your Personal Allowance is each time it changes.
If your total annual income is more than your Personal Allowance, you’re liable to pay Income Tax on the amount that exceeds the Personal Allowance. Different rates of Income Tax apply, depending on the type of income and how much it is.
Although tax isn’t deducted from the State Pension, it will still use up some of your tax-free personal allowance. In 2024/25 the standard tax-free personal allowance is £12,570, which means that if you receive the full new State Pension, you will have £1,067.60 (£12,570 less £11,502.40) of your personal allowance remaining for other taxable income streams, such as your Local Government Pension.