MIL been sent a letter from HMRC saying she owes tax on her pension?

[nipersvest]

Bit odd, she's 86, never had one of these letters before but out the blue she's had one today saying she owes tax. She gets a number of different pensions, state, two private pensions which pay a tiny amount and another very small one inherited from her husband. Letter looks genuine but confusing as to why she's suddenly getting a tax bill for 23/24, anyone any ideas as to why?

Keeping tax bands frozen was a Tory policy originally

Maybe, but fiscal drag in modern times very much originated with Gordon Brown deciding to raise thresholds with inflation rather than earnings during a period of sustained growth and low inflation. Freezing thresholds full stop was just a natural progression from there.

And, despite continuing Ken Clarke's policies which eliminated the deficit by 1998 and then delivered four years of budget surpluses after that, he then went on a massive spending spree so that one in every five pounds spent was not matched by tax even during periods of economic growth. We have never managed to eliminate this structural deficit; it is this period of profligacy which we are paying for now and the £30bn black hole is Gordon Brown's chickens coming home to roost.

You can have something called the Starter Savings rate so if your whole income is savings interest ( Not including ISAs) or you have a small pension or State pension income you can have £17570 in total before having to pay Tax.

yes, but just to emphasise the extra money must be from interest on savings not extra pension

if you have state pension + private pension(s) then you will owe income tax on any excess over £12,570 combined total pension earnings. Interest on savings is a different matter, as you outline.

My dad has had the same. It is only a small amount, but he is only on state pension. No savings or investments elsewhere.

What, by increasing their income by a larger percentage than most working people?

She gets £12,570 free pay and anything over that she'll have to pay pension on. The state pension has been going up each year and is now closer to free pay limit. F two small private pensions of her own and one from her DH she'll almost certainly over the limit. I think government can now see and take money from banks.

Due my first work pension payment this month. Have taken.on a part-time job. Pension taxed at source for me.

My elderly cousin has just been hit with a demand. His state pension (and the only one he has...no private pensions) is more than his tax allowance . If unemployment benefits are also classed as taxable income why aren't unemployed people also getting demands from HMC if their benefits exceed?

No labour have not changed the tax thresholds

"I think government can now see and take money from banks."

the only time HMRC will take money direct from your own bank account is when you have fallen foul of several linked criteria:
a) you owe more than £1,000 of unpaid tax
b) you have ignored at least 4 demands that you pay what you owe
c) after having taken any money your account balance must remain above minimum of £5,000

If you do not meet one of more of those criteria they cannot just take your money.

unemployment benefit (JSA) is time limited and so either the person has returned to work so any tax owed will be recovered via PAYE, or they have been switched to non taxable benefits and thus won't tip over the annual personal allowance

Good to know. Thank you

People seem to be forgetting that when you are over your personal allowance when retired, you still get to keep 80% of it.
I’ve seen posts from pensioners whining that they are going to ‘lose it all’ in tax 🙄
If you go £1000 over the limit, you still keep £800.
If you are using the starter savings rate then you can have £5000 in interest income tax free if you are at your PA limit with a pension.

It's cheeky. No other benefits are taxed.

Carers allowance can be taxed that pathetic £80 and change a week if you work (your allowed to work a little) they will tax you on your total income including carers

Shite isn't it

Just for clarity, it is not an income you take from your savings each month, it is a capital withdrawal so is not subject to income tax. Although any interest you make on your savings over £1000 (I think) is income and taxable. Make sure you max out your ISA's to mitigate tax.

I am sure you already know this but just in case anyone reading it gets confused.
Edited to add
Sorry just seen that this has subsequently been addressed

Yes, they admitted to previous assessments being wrong, but I’ve still got to pay extra for their mistake.

We have lovely Rachel to blame for this!

Rubbish. It has always been the case that you pay tax on any income over your personal allowance. It's not something that has just suddenly started happening.

Yeah kind of agree with this.

Lots of pensioners pay tax on their pensions if they get more than the state pension/above the tax allowance. It’s always been the way and to be fair if you’ve been paying into a private or company pension you will have been getting tax relief on your contributions throughout your working life so fair enough that you have to pay some tax on pension income (probably at a lower rate that the relief you originally got if you were a higher rate tax earner)

Rishi Sunak announced that income tax allowances would be frozen until 2026 so if blame is to be apportioned then look at the Conservatives first. Labour have however announced that the freeze will stay in place until 2028 though. We are a bit economically screwed in this country with no apparent plan to recover.

I do think there’s something not quite right with pensioners suddenly being told they owe tax though - governments never seem to put effort into advertising the consequences of policy changes to those impacted and it’s horrible being served with an unexpected bill.

stealth tax

A person over 55 or 57 (age dependant) can take a tax free lump sum out of their private pension

rubbish, quite a few "benefits" are classed as taxable income
Income Tax: introduction: Tax-free and taxable state benefits - GOV.UK