{"id":150412,"date":"2025-06-01T21:16:10","date_gmt":"2025-06-01T21:16:10","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/150412\/"},"modified":"2025-06-01T21:16:10","modified_gmt":"2025-06-01T21:16:10","slug":"warning-to-state-pensioners-earning-over-597-a-year-personal-finance-finance","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/150412\/","title":{"rendered":"Warning to state pensioners earning over \u00a3597 a year | Personal Finance | Finance"},"content":{"rendered":"

State pensioners are being warned that they could owe Income Tax to HMRC<\/a> if they earn more than \u00a3597.<\/p>\n

That\u2019s because from April, the state pension<\/a> went up by another 4.1% thanks to the Triple Lock<\/a>, which automatically uprates state pension<\/a> payouts by one of inflation<\/a>, wage growth or a flat 2.5%. Because wage growth is 4.1% this year, that\u2019s the amount pensions have gone up by. It means that the state pension<\/a> has hit \u00a3230 per week, or \u00a311,973 per year for someone on the full new state pension<\/a> with maximum National Insurance year contributions.<\/p>\n

In turn, pensioners will be just \u00a3597 away from the Personal Allowance of \u00a312,570. Every \u00a31 earned over \u00a312,570 is taxed at 20% (up to \u00a350,270 where it goes up to 40%). So pensioners earning \u00a3598 will mean you start paying some Income Tax<\/a> to HMRC<\/a>.<\/p>\n

Earnings doesn\u2019t just mean working, it could be income from a private workplace pension, or from letting out a second property.<\/p>\n

The Low Incomes Tax Reform Group wants the government to warn pensioners when this may happen.<\/p>\n

It said: \u201cWe think that DWP<\/a> and HMRC<\/a> should work together to ensure that pensioners are warned about possibly needing to pay tax on their state pension<\/a> in future. This should include setting out how the tax will be collected and the likely tax liability.<\/p>\n

“Some words of warning could, for example, be included with the state pension<\/a> notification letters that DWP<\/a> send out each spring in advance of the April pension increases.\u201d<\/p>\n

Money expert Martin Lewis, though, has stressed that paying tax on some of your income as a pensioner will not leave you worse off. This is because our tax system is \u2018marginal\u2019, and you will almost always end up with more money in your pocket if you earn more.<\/p>\n

Martin Lewis was asked a question about the tax threshold on his show on March 4. He was asked: \u201cExplain to me why any pensioner would want to increase their pension? You will be taxed 20% over \u00a312,570, which means you\u2019ll be worse off and you\u2019ll be asked to pay more in, you\u2019d then have your benefits stopped if you\u2019re below the limit and that takes you below the limit and that takes you over the limit even by 10p.\u201d<\/p>\n

Martin then said: \u201cLet me split that into two. Without being rude, on the first bit you\u2019re talking nonsense.<\/p>\n

\u201cOkay, look, tax in this country is marginal. You only pay 20% on the amount above the threshold. The state pension<\/a> has always been taxable if you have other income, it counts as taxable income. So look, let\u2019s say you add \u00a31,000 a year to what you earn and that \u00a31,000 is above the threshold. Yes it\u2019s taxed so you only get \u00a3800 of it.<\/p>\n

\u201cBut you still get \u00a3800 more! Tax is marginal, you always want to earn more, you always receive more if you earn more. You might not get every pound more that you\u2019re being given but you\u2019re still, the more you earn the more you get, so the tax thing, that\u2019s a red herring.\u201d<\/p>\n

He stressed that the other aspect could cost you money if, for example, you spent money buying back a missing National Insurance year to boost your pension pot, when you could have used Pension Credit for free.<\/p>\n

He added: \u201cThe other one isn\u2019t – for those on very low incomes if you may be eligible for pension credit and you don\u2019t have any other income, the pension credit effectively tops you up to the full state pension<\/a> anyway so if you\u2019re gonna buy years to top you up to the full state pension<\/a> it is possible that you would have simply got it via pension credit anyway.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"State pensioners are being warned that they could owe Income Tax to HMRC if they earn more than…\n","protected":false},"author":2,"featured_media":150413,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3093],"tags":[51,474,22664,1059,2499,1786,1787,16,15],"class_list":{"0":"post-150412","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-finance","10":"tag-income-tax","11":"tag-martin-lewis","12":"tag-personal-finance","13":"tag-state-pension","14":"tag-triple-lock","15":"tag-uk","16":"tag-united-kingdom"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/114610187952627666","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/150412","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=150412"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/150412\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/150413"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=150412"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=150412"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=150412"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}