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When you reach State Pension age you no longer pay National Insurance contributions, but you don't automatically stop paying Income Tax. If your taxable income - including your State Pension - is more than your tax-free allowances you're still a taxpayer.
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HM Revenue & Customs (HMRC) may have already contacted you to help you work out if you should be paying tax at State Pension age. You may have received a Pension Coding form P161 - it's important that you fill this in so that you pay the right tax and get your age-related allowances. If you're within a month of reaching State Pension age and haven't heard from HMRC please download the form below or contact them to ask for the form.
Why it's important to fill in your Pension Coding form
Go to form P161 Pension Coding
To work out if you are a taxpayer follow these three steps (these are covered in more detail below):
If your taxable income is more than your tax-free allowances, you're a taxpayer and must contact HMRC. If your tax-free allowances are the same as or more than your taxable income, no action is necessary. If you think that you shouldn't be paying tax but are, you'll be able to claim a refund.
Some income is taxable and some is never taxed. You compare only your taxable income with your tax-free allowances in a tax year (6 April to 5 April) to see if you're a taxpayer.
We've included the most common forms of taxable and non-taxable income below. However, please also refer to the full list of taxable and non-taxable income by following the link at the end of this section.
Your taxable income includes:
If you're married or in a civil partnership and have income from savings, investments or property held in joint names you're usually treated as getting half the income each. So you only have to pay tax on your half. If you're not married or in a civil partnership you count only your share of joint income.
Income that's never taxed includes:
A full list of taxable and non-taxable income at a glance
Your tax-free allowances are the amount of income you can get without paying tax. They include the Personal Allowance and the Blind Person's Allowance.
Everybody gets the basic personal allowance, but if you're 65 or over and your taxable income is below certain levels the rate increases.
| Personal Allowance rates | 2011-12 | Income limit (see note) |
|---|---|---|
| Basic amount for someone under 65 | £7,475 | none |
| Age 65 to 74 | £9,940 | £24,000 |
| Age 75 or over | £10,090 | £24,000 |
Note: If your taxable income is over the 'income limit', the age-related allowance reduces by half of the amount (£1 for every £2) you have over that limit, until the basic rate allowance is reached. You'll always get the basic allowance, whatever the level of your income.
So if, for example, you're 66 and have a taxable income of £24,500 (£500 over the limit) your age-related allowance of £9,940 would reduce by £250 to £9,690.
If you're 66 and have an income of £33,000 (£9,000 over the limit) your age-related allowance of £9,940 will reduce by £4,500 (ie £9,000 ÷ 2) to become £5,440. However, you can't get less than the basic allowance so you'll get £7,475.
If you're certified blind and are on a local authority register of blind persons, or if you live in Scotland or Northern Ireland and you're unable to perform any work for which eyesight is essential, you can claim Blind Person's Allowance. Like your Personal Allowance, this is an amount of income you can get without paying tax. For 2011-12 the allowance is £1,980.
More about Blind Person's Allowance
Take your tax-free allowances away from your taxable income - if there's anything left you count as a taxpayer and must contact your Tax Office if you're not already paying tax. If there's nothing left you shouldn't be paying tax and may be due a refund.
Remember that you may qualify for other allowances such as Married Couple's Allowance and Maintenance Payments Relief that can reduce your tax bill. In some cases this may mean that you have nothing to pay at all - follow the link below to ‘Introduction to allowances and reliefs if you pay tax’ to find out more.
If you get a personal (including retirement annuity) or company pension
or do part-time work and as a result you pay tax through the PAYE (Pay
As You Earn) tax code system, your Tax Office may be able to collect
any extra tax you owe that way - including on your State Pension. Otherwise
they'll ask you to complete a Tax Review form P810 to report your income
or pay tax through Self Assessment.
Introduction to allowances and reliefs if you pay tax
Income Tax rates and allowances
Do you need to complete a tax return?
If you want to phone the Tax Office follow the 'Contact your Tax Office' link below. If you want to write to your Tax Office you'll usually find the address on any letters or forms you've received from HMRC. If you can't find your Tax Office address, use the 'Find a Tax Office' link below. Whether you phone or write the Tax Office will need your National Insurance number, if possible
If you think you're paying too much tax or shouldn't be paying tax at all, follow the link below to find out how you can claim a refund.
Claiming back tax or National Insurance at State Pension age
Tax if you take your State Pension later on
Tax when retiring abroad or back in the UK
Read more about checking your tax status on the Age UK website (Opens new window)
More about tax for pensioners from the Low Income Tax Reform Group website (Opens new window)
More about tax for pensioners from the TaxHelp for Older People website (Opens new window)
More tax advice from the Citizens Advice Bureau website (Opens new window)
