Submit Self Assessment or not ?

[Dod101]

So if you have salary or a non-state pension then you will have a PAYE code. But if all your income is dividends, capital gains, interest, state pension etc. then there is no PAYE code, and so a PAYE code would not help adjust for dividend income.

Can this be true? State pension is taxable so, if total income above personal tax allowance, it would be taxed - presumably usually via PAYE.

If you do have a non-state pension then all income tax, including any on SP, is taken from that - if on PAYE. Such is my understanding.

No. Lootman is correct. My State Pension is paid gross (they all are I think) and for me to pay any tax due I need to do a self assessment and pay the tax the following January for tax due to the previous 5 April.

Indeed it seems so: https://www.gov.uk/tax-on-pension/how-your-tax-is-paid

If the State Pension is your only income
You’re responsible for paying any tax you owe. Fill in and send a Self Assessment tax return if you owe anything.

I must be remembering how things were before The Boy George got his hands on them.

The State Pension is not my only income but it is nowadays almost my only taxable income. I am still a bit over the tax free allowance for another year or two yet in respect of dividends for shares held outside of my ISAs and my SIPP and that will not change much because there is a big capital gain tied up in the shares held in certificates and I need to judge whether it is worthwhile paying CGT or the dividend tax. The one being a one off hit and the other an ongoing one makes it a fine balance.

I submit a self assessment form online but the amount due either way is rather trivial and I do not really know why I need to. It is all automated online so I suppose it does not cost much for HMRC to collect my pittance.

Dod

[Gersemi]

You’re responsible for paying any tax you owe. Fill in and send a Self Assessment tax return if you owe anything.

I must be remembering how things were before The Boy George got his hands on them.

The State Pension has never been subject to PAYE (but it is taxable income).

[XFool]

You’re responsible for paying any tax you owe. Fill in and send a Self Assessment tax return if you owe anything.

I must be remembering how things were before The Boy George got his hands on them.

The State Pension has never been subject to PAYE (but it is taxable income).

Really? Are you sure? I'm not saying you are wrong but it comes as a big surprise to me - it seems to imply many OAPs have always had to submit a tax return. This just doesn't sound right to me...

Have they always kept the SP below the Personal Allowance? To me this seems to be the only way SP recipients would not have to do a SA. Also, before 2016(?), most people receiving extra money would have had the tax deducted at source. Seems to imply a fairly large number of state pensioners (even those not receiving an employee pension etc.) would have had to go on SA post 216. I know this happened to me and others, but I did not think it would be that widespread - surprised there was not a lot more political fuss if this were so.

No, there's surely something wrong here. I just don't believe that - under the old system - an employee on BRT not needing to fill in a tax return would, when they retired and received a SP then normally need to go on to SA.

I suspect what you may mean is simply that such a person would not normally have/need a tax code?

[scrumpyjack]

AFAIAA the state pension has never had tax deducted at source and tax codes are assessed on other sources of income so that any deduction of tax is made from those other sources and not from the state pension. This results in tax being deducted at about a 50% rate on one of my private pensions

[XFool]

AFAIAA the state pension has never had tax deducted at source and tax codes are assessed on other sources of income so that any deduction of tax is made from those other sources and not from the state pension.

Yes, now - as a result of Osborne's 2015 budget. But, prior to that, as most "other sources of income" (i.e. interest and dividends) were taxed at source (at an effective rate of 0% on dividends for non HR tax payers) no tax return would be needed for most SP recipients who did not also have a separate pension.
(I know this as, despite having an employee pension and the SP, I didn't need to submit a tax return.)

I would assume in that case, BR tax would simply have been deducted from the SP at source. Why not? If not, how?

[Gersemi]

AFAIAA the state pension has never had tax deducted at source and tax codes are assessed on other sources of income so that any deduction of tax is made from those other sources and not from the state pension.

Yes, now - as a result of Osborne's 2015 budget. But, prior to that, as most "other sources of income" (i.e. interest and dividends) were taxed at source (at an effective rate of 0% on dividends for non HR tax payers) no tax return would be needed for most SP recipients who did not also have a separate pension.
(I know this as, despite having an employee pension and the SP, I didn't need to submit a tax return.)

I would assume in that case, BR tax would simply have been deducted from the SP at source. Why not? If not, how?

I think the level of the state pension has always been below the personal allowance, and as you say savings interest and dividends had tax deducted at source previously. In the past there used to be a higher personal allowance for those over 65 on a low income as well, so it was never an issue, hence there is no mechanism for deducting tax at source on the State Pension.

Banks etc have to report details of interest paid to HMRC, so if someone is getting a large enough amount to worry them, HMRC can issue a tax return.

[XFool]

I think the level of the state pension has always been below the personal allowance, and as you say savings interest and dividends had tax deducted at source previously. In the past there used to be a higher personal allowance for those over 65 on a low income as well, so it was never an issue, hence there is no mechanism for deducting tax at source on the State Pension.

That is the only scenario I could imagine. However, it is far from easy to be sure because, under the old state pension, while the Basic State Pension (BSP) was a known - along with the normal Personal Tax Allowance - the SP consisted of BSP + Additional Pension. The AP being income related. So the paid SP itself was variable and individualistic.

[scrumpyjack]

I suspect a major reason for having the savings and dividend income allowances was to avoid a large number of people, including pensioners, from having to submit a tax return.

[Bouleversee]

I completed my paper return after (as previously reported) failing to get past the extra security questions I was asked after logging on via Govt. Gateway and receiving the security code) and paid £6.85 for express delivery to HMRC which should have got it there on the extended deadline date. I enclosed a cheque somewhat in excess of what I calculated might be due in tax. I don't yet know whether the Post Office got it there in time but this morning I received a letter from HMRC dated 24 May saying they had charged me a £100 penalty because they hadn't received my return on time and that I needed to send my return now (preferably filing it online) , clear any outstanding tax balance and pay the penalty. Strange, really, since I see the £250 cheque I had sent them was debited to my bank account on 26 May. Despite having previously told me I didn't need to send a return, the letter ended with the following admonition: You must send us a tax return, even if you don't think you owe any tax, or you've already paid all the tax you owe." So why are they telling some people, including me, they don't need to do a return.

I couldn't make up my mind whether to laugh or cry so I phoned the dept. handling my complaint who had given me the extension and spoke to a very sympathetic and apologetic chap who said he would cancel the penalty and look into when my return had been received.

I do have a PAYE code because part of my income now is a residual fixed rate annuity from my husband's estate and my state pension is covered by this. The reason I thought dividends might not be included is that I still seem to owe tax though the dividends had gone down. I recently got a notice from the annuity provider that my annuity payment would be less this year, presumably because the tax code has gone up. All too complicated for my feeble brain. I suppose it could be because the tax allowance has been frozen while the State Pension and SERPS have increased a bit.

[XFool]

AFAIAA the state pension has never had tax deducted at source and tax codes are assessed on other sources of income so that any deduction of tax is made from those other sources and not from the state pension.

Yes, now - as a result of Osborne's 2015 budget. But, prior to that, as most "other sources of income" (i.e. interest and dividends) were taxed at source (at an effective rate of 0% on dividends for non HR tax payers) no tax return would be needed for most SP recipients who did not also have a separate pension.
(I know this as, despite having an employee pension and the SP, I didn't need to submit a tax return.)

I would assume in that case, BR tax would simply have been deducted from the SP at source. Why not? If not, how?

I think the level of the state pension has always been below the personal allowance, and as you say savings interest and dividends had tax deducted at source previously. In the past there used to be a higher personal allowance for those over 65 on a low income as well, so it was never an issue, hence there is no mechanism for deducting tax at source on the State Pension.

Thinking about this when posted, it seemed to make sense. Now, rightly or not, it doesn't!

I can understand that the Basic State Pension, in the old SP, may well have always been below the Personal Allowance. But the old SP consisted of the BSP + Additional SP (SERPS etc). Now this, for many people, could surely be above the Personal Allowance, even without any employee pension or additional income. So, once again... their SP must have been taxed by some means - surely not always by self assessment?

I stand to be corrected.

[Lootman]

AFAIAA the state pension has never had tax deducted at source and tax codes are assessed on other sources of income so that any deduction of tax is made from those other sources and not from the state pension.

Yes, now - as a result of Osborne's 2015 budget. But, prior to that, as most "other sources of income" (i.e. interest and dividends) were taxed at source (at an effective rate of 0% on dividends for non HR tax payers) no tax return would be needed for most SP recipients who did not also have a separate pension.
(I know this as, despite having an employee pension and the SP, I didn't need to submit a tax return.)

I would assume in that case, BR tax would simply have been deducted from the SP at source. Why not? If not, how?

I think the level of the state pension has always been below the personal allowance, and as you say savings interest and dividends had tax deducted at source previously. In the past there used to be a higher personal allowance for those over 65 on a low income as well, so it was never an issue, hence there is no mechanism for deducting tax at source on the State Pension.

Thinking about this when posted, it seemed to make sense. Now, rightly or not, it doesn't!

I can understand that the Basic State Pension, in the old SP may well have always been below the Personal Allowance. But the old SP consisted of the BSP + Additional SP (SERPS etc). Now this, for many people, could surely be above the Personal Allowance, even without any employee pension or additional income. So, once again... their SP must have been taxed by some means - surely not always by self assessment?

I stand to be corrected.

Not many will have a SP that is over the annual personal allowance, which was 12.5K or so the last time I looked. For a SP to be above that it would need to be about 240 a week.

That may be possible for those with a high earnings-related component or who deferred, particularly under the old rules. But it cannot be that many people. By way of contrast mine is about 190 a week, or 9K a year or so, well below the allowance, and mine is higher than most people I talk to.

[XFool]

I can understand that the Basic State Pension, in the old SP may well have always been below the Personal Allowance. But the old SP consisted of the BSP + Additional SP (SERPS etc). Now this, for many people, could surely be above the Personal Allowance, even without any employee pension or additional income. So, once again... their SP must have been taxed by some means - surely not always by self assessment?

I stand to be corrected.

Not many will have a SP that is over the annual personal allowance, which was 12.5K or so the last time I looked. For a SP to be above that it would need to be about 240 a week.

That may be possible for those with a high earnings-related component or who deferred, particularly under the old rules. But it cannot be that many people. By way of contrast mine is about 190 a week, or 9K a year or so, well below the allowance, and mine is higher than most people I talk to.

Well that suggests an interesting (theoretical) calculation.

If I sum the current BSP with my own Graduated Retirement Benefit and then add on my Pre 97 additional SP - without subtracting my Contracted Out deduction (COD) - I get a total of £248.23 pw (not what I am actually paid because of COD).

This is £12,907pa which is above the current Personal Allowance of £12,570 with no other sources of income included. So it isn't that difficult.

So, even if I had no other sources of taxable income I would still have to pay some tax on my SP alone. How?

(Whether this case would be different if the Age Related Personal Allowance had not been abolished is another matter)

[Lootman]

I can understand that the Basic State Pension, in the old SP may well have always been below the Personal Allowance. But the old SP consisted of the BSP + Additional SP (SERPS etc). Now this, for many people, could surely be above the Personal Allowance, even without any employee pension or additional income. So, once again... their SP must have been taxed by some means - surely not always by self assessment?

I stand to be corrected.

Not many will have a SP that is over the annual personal allowance, which was 12.5K or so the last time I looked. For a SP to be above that it would need to be about 240 a week.

That may be possible for those with a high earnings-related component or who deferred, particularly under the old rules. But it cannot be that many people. By way of contrast mine is about 190 a week, or 9K a year or so, well below the allowance, and mine is higher than most people I talk to.

Well that suggests an interesting (theoretical) calculation.

If I sum the current BSP with my own Graduated Retirement Benefit and then add on my Pre 97 additional SP - without subtracting my Contracted Out deduction (COD) - I get a total of £248.23 pw (not what I am actually paid because of COD).

This is £12,907pa which is above the current Personal Allowance of £12,570 with no other sources of income included. So it isn't that difficult.

So, even if I had no other sources of taxable income I would still have to pay some tax on my SP alone. How?

(Whether this case would be different if the Age Related Personal Allowance had not been abolished is another matter)

I am not saying it is not possible. Only that it is sufficiently uncommon that HMRC see no reason to impose PAYE and withholding on state pensions.

Also, those on high SPs most likely have other income that pushes them into self-assessment or PAYE anyway. How many people get a SP of 250 a week and have zero other income?

[XFool]

I am not saying it is not possible. Only that it is sufficiently uncommon that HMRC see no reason to impose PAYE and withholding on state pensions.

It may not be typical but I have difficulty believing it is that uncommon. In my own case I was never a high flyer so simply a full employment record plus SERPS (in the past) would surely do it for a reasonable number of people who did not have any company pension. (Indeed, in the past, would more people NOT have a company pension than have one?)

Also, those on high SPs most likely have other income that pushes them into self-assessment or PAYE anyway. How many people get a SP of 250 a week and have zero other income?

Yes, but that is different. I am specifically putting forward the situation if somebody does not have other income besides their SP, which is above the Personal Allowance.

[Lootman]

I am not saying it is not possible. Only that it is sufficiently uncommon that HMRC see no reason to impose PAYE and withholding on state pensions.

It may not be typical but I have difficulty believing it is that uncommon. In my own case I was never a high flyer so simply a full employment record plus SERPS (in the past) would surely do it for a reasonable number of people who did not have any company pension. (Indeed, in the past, would more people NOT have a company pension than have one?)

Also, those on high SPs most likely have other income that pushes them into self-assessment or PAYE anyway. How many people get a SP of 250 a week and have zero other income?

Yes, but that is different. I am specifically putting forward the situation if somebody does not have other income besides their SP, which is above the Personal Allowance.

Again, I would make the presumption that the number of people in that category are insufficient to trouble HMRC into changing the rules.

Someone who worked for decades and has earnings-related bonuses and can afford to defer their SP will almost definitely have other income.

[XFool]

Also, those on high SPs most likely have other income that pushes them into self-assessment or PAYE anyway. How many people get a SP of 250 a week and have zero other income?

Yes, but that is different. I am specifically putting forward the situation if somebody does not have other income besides their SP, which is above the Personal Allowance.

Again, I would make the presumption that the number of people in that category are insufficient to trouble HMRC into changing the rules.

It's not so much a case of changing the rules as what exactly are/were the rules? - on taxation of the SP by itself - particularly in the past.

Someone who worked for decades and has earnings-related bonuses and can afford to defer their SP will almost definitely have other income.

Again, this is irrelevant to the question I have - taxation of the SP alone. Plus remember, in the past, other income (dividends, interest) were taken care of by taxation at source for BR taxpayers. So it still seems to me to be a far from unusual situation.

[Gersemi]

Also, those on high SPs most likely have other income that pushes them into self-assessment or PAYE anyway. How many people get a SP of 250 a week and have zero other income?

Yes, but that is different. I am specifically putting forward the situation if somebody does not have other income besides their SP, which is above the Personal Allowance.

Again, I would make the presumption that the number of people in that category are insufficient to trouble HMRC into changing the rules.

It's not so much a case of changing the rules as what exactly are/were the rules? - on taxation of the SP by itself - particularly in the past.

Someone who worked for decades and has earnings-related bonuses and can afford to defer their SP will almost definitely have other income.

Again, this is irrelevant to the question I have - taxation of the SP alone. Plus remember, in the past, other income (dividends, interest) were taken care of by taxation at source for BR taxpayers. So it still seems to me to be a far from unusual situation.

Before Self Assessment there was a way for The Inland Revenue (as it was back in those days) to issue an assessment on people who owed tax but weren't in employment or self employment, it was called direct payment or something like that. Once Self Assessment came in in it would be via that. These were very rare.

[XFool]

Before Self Assessment there was a way for The Inland Revenue (as it was back in those days) to issue an assessment on people who owed tax but weren't in employment or self employment, it was called direct payment or something like that. Once Self Assessment came in in it would be via that. These were very rare.

OK. But I confess I still cannot get my head around this.

In the past there must have been more than a tiny number of people who retired on the SP alone* which, with the old state pension, meant the Basic State Pension plus SERPS. And, as I demonstrated using real figures from myself as an example (assuming I only had a SP), I would have been above the current (and previous) Personal Allowance and therefore my SP would have to be taxed. Admittedly I didn't allow for an Age Related Personal Allowance.

Now, if I had been a very highly paid person - a very rare minority - this might not 'prove' anything. But as I wasn't... I am still having difficulty seeing this one. Could the Age Related Personal Allowance be the key? Perhaps that is what it was for?


* Any "extra income" is irrelevant here as for the most part, if taxable, it would then have been taxed at source.

[Gersemi]

Before Self Assessment there was a way for The Inland Revenue (as it was back in those days) to issue an assessment on people who owed tax but weren't in employment or self employment, it was called direct payment or something like that. Once Self Assessment came in in it would be via that. These were very rare.

OK. But I confess I still cannot get my head around this.

In the past there must have been more than a tiny number of people who retired on the SP alone* which, with the old state pension, meant the Basic State Pension plus SERPS. And, as I demonstrated using real figures from myself as an example (assuming I only had a SP), I would have been above the current (and previous) Personal Allowance and therefore my SP would have to be taxed. Admittedly I didn't allow for an Age Related Personal Allowance.

Now, if I had been a very highly paid person - a very rare minority - this might not 'prove' anything. But as I wasn't... I am still having difficulty seeing this one. Could the Age Related Personal Allowance be the key? Perhaps that is what it was for?


* Any "extra income" is irrelevant here as for the most part, if taxable, it would then have been taxed at source.

What can you not get your head around? Like I said, the tax wasn't collected via PAYE, IR sent you an assessment and you made a direct payment to them, in very similar way to the way self employed people pay their tax.
And yes Age Related Allowance did make a difference, and Married Couples Allowance as well , remember that?

[XFool]

What can you not get your head around? Like I said, the tax wasn't collected via PAYE, IR sent you an assessment and you made a direct payment to them, in very similar way to the way self employed people pay their tax.

That these were "very rare" - given SERPS.