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?

"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"

What is not quite right is reaching state retirement age and still not understanding the most basic workings of income tax.

You've had around 40+ years to learn how it works, so why be surprised when you have to pay tax in retirement.... that is not a change in policy, it has always been that way.

pretty much All pensioners complain that they have to pay tax

What, exactly is it that you find stealthy about someone who has income over the standard personal allowance having to pay tax?
I mean, how in 2025 do we still have adults that dont know they have a personal allowance and that they need to pay tax on income that is above the PA. At what point should people start taking a bit of personal responsibility to educate themselves on these things?

In what way? It’s always been a thing

Amazing that people have to reach this age to understand how tax works

It's the government getting more tax without raising tax rates, you freeze the allowances and then as pensions rise with inflation more pensioners are dragged into paying tax, so much for a labour government. Now is just when her combined pensions breached the tax free income band.

My dad has pension credit his income is so low yet the private pension he gets which is around £80 every six weeks gets taxed by around a quarter he has questioned it but they say no that's correct and blither on about him getting several hundred pounds he says no its gone down they say no it hasn't the figures from the company support him the figures on his p60 support him HMRC seem to grab figures out of fresh air and ignore evidence

No-one cares enough to pay attention

Not really the state pension was always tax free and many pensioners may not have paid tax except PAYE which you were hardly aware of as it comes off your pay before you get it. Finding out you may actually owe tax can be a pretty foreign concept for ordinary working people who have now retired. For those with big incomes tax returns are of course second nature!

The fact that it has happened because a labour government has frozen the tax free income band so that rises in pensions necessary for income to keep up with inflation brings pensioners into owing tax is quite outrageous if you think about it.

Pension credit it usually because you don't qualify for a full state pension and it pretty much brings your pension up to that level (or perhaps a bit higher if there are other components). The tax free income band is only very slightly above the state pension now, so a very small private pension can take you over the tax free band and then you start to pay tax. Any interest income will also be taken into account

Get him to fill in a self assessment form if he thinks it's wrong.

The state pension has never (or at least any time this century) been tax free, it has always counted towards total income for tax purposes.

Plus as people over state pension age don't pay NI, which is just tax in another name, they pay less than working people on the same income.

But because pensioners have been treated more generously than most working people so their income has grown faster (increased 17% in two years) their income is now above the tax threshold so part is taxable if they have even a small personal pension on top.

But the freezing of the tax thresholds isn't a Labour policy, that was in place for the last few years of the Conservative government.

Why do people start threads on this when it’s literally so easy to find an answer on the HMRC website?

Are you sure her income hasn’t changed? State pension goes up each year and so do many private pensions. She may have been just under the taxable threshold and now just over.

sorry but no, my point was pensioners should be well aware of how tax works. You even accept that yourself by admitting they are used to PAYE, so are fully aware of the impact of total income and going over the personal allowance.
The presumption that older people ("pensioners") cannot understand how things work following a lifetime of experiencing them is frankly offensive.

Labour hoisting itself on its own petard by ruling out increasing the main taxes means we do now live with a Govt that is desperate for money and trying every way it can to claw if back from those least likely to vote for it, instead of just doing a U-Turn and putting up income tax, which is the fairest tax of all.

post his income figures on here then and we will tell you once and for all who is correct.
Either his TOTAL TAXABLE income is more than £12,570 or it isn't.
It really is that simple.

She’s received this notification now because it takes HMRC a while to catch up with things after the end of the relevant tax year.

She (or you if she needs help and allows you) can go onto her personal HMRC account online and enter her total income (from all sources) for the 24-25 year and the current year, to work out how much tax will be due so that she can set that amount aside.

By the way, if anyone needs to register for self-assessment for the first time then the deadline for 2024/25 tax year is this Sunday.

Rachel’s getting desperate, seriously though, with the freezing of the tax thresholds, anyone with a full state pension who is also in receipt of even relatively small amounts extra, will now fall into the lower tax bracket, HMRC aren’t exactly known for their speed in processing tax returns so receiving a tax demand for 23/ 24 in late 25 isn’t unusual

@BadgernTheGarden Either you are ignorant about this or you're being deliberately dishonest to discredit the Labour government. Personal Allowances for Income tax were frozen by the previous CONSERVATIVE government in 2021, and they then extended that to 2028. This information is easy to find.

Also as a pp said, state pensions are not tax free, it's just that tax is not deducted directly from them. You can't pin this on this government, much as you'd like to.

As a heads up, DD young adult, just received same with regards to her savings interest, she had to go back three years too. She had no idea you paid tax on savings 😄

So HMRC are most certainly catching up with everyone. It's the new software/AI which has access to all our bank accounts.

State pension has always been counted as taxable income. This is pretty basic stuff really. If your income is above the PA you will pay tax.
It's no wonder people say that mumsnet is the last place to come for financial advice when posters are declaring things like the state pension has always been tax free. It is completely inaccurate.

How could she not know? You are informed in tbe T&C when opening a savings account and are sent a certificate of interest for tax purposes each year.

Well yes, but how many people are actively doing tax returns when they are on PAYE. Not many, and for a while there was no checking up. Now there is.