Local independent financial adviser, Becky Hammonds of Willow Financial Solutions, reminds pensioners that tax liability continues into retirement:
Some pensioners don’t realise that they are taxed on their retirement income so it may come as a bit of a shock to find out that income tax continues unless the amount you receive is under the tax threshold.
Yes, income from pensions is taxed like any other kind of income. You have a personal allowance which is currently £12,570 for 2023/24 tax year, where you pay no income tax, and then you pay 20 per cent income tax on everything from £12,571 to £50,270 before higher rate tax kicks in.
If your income is in the bracket of £50,270 to £125,140 then you pay 40% income tax and over £125,141 and you pay 45% income tax.
If you only receive the State Pension, then you will be under the current tax threshold.
This April, the Treasury confirmed the state pension would increase in line with September’s CPI inflation rate of 10.1%. The full new state pension will rise to £203.85 a week or £10,600.20 over the year from 6 April, under the £12,570 tax threshold.
It is important to be aware of these points before you retire and plan accordingly in order to optimise your savings in the most tax efficient manner possible.
For pensions and investment advice contact Becky Hammonds on 07969 269677 or email becky@willowfs.co.uk
