Paying the right tax after State Pension age
In this section:
Tax if you're self-employed and getting a pension
Reaching State Pension age doesn't automatically mean retirement from work. If you're self-employed you may decide to continue working and claim your State Pension. You may also receive a company or personal pension or both. How you'll pay tax will depend on your circumstances.
If you're self-employed and your only pension is the State Pension
If you're self-employed, you'll need to complete a Self Assessment tax return each year to report your overall income and any capital gains, and to claim any tax allowances against your tax bill.
Once you start receiving the State Pension you must declare this on your tax return as well. This is because it's taxable income that is paid to you without tax taken off.
Bear in mind that you stop paying National Insurance contributions (NICs) from State Pension age - so you'll no longer need to include these on your tax return. The only exception is Class 4 NICs which are due on taxable profits made in the tax year in which you reached State Pension age.
More on Self Assessment for the self-employed
Making sure you've stopped National Insurance contributions
If you're self-employed and get a company or personal pension and the State Pension
If you're self-employed and getting one or more pensions as well as the State Pension, you'll pay tax in a number of different ways.
You'll pay tax on your self-employment income (and usually on other sources of untaxed income, apart from the State Pension) through Self Assessment after completing a tax return each year.
You'll pay tax on any company or personal pension you receive through the PAYE (Pay as You Earn) system. Your Tax Office issues a tax code which will tells the pension provider how much to take off your pension/s before they pay you. The tax code is based on the information you've given about your overall income. If you get the State Pension as well, we'll normally ask your pension provider to take off any tax owed on it at the same time by giving them a new tax code for you.
Read more information on pensions, state benefits and your tax code
If you're self-employed and on a low income
If you're self-employed and you get a pension you may be on a low income. In this case you may be able to claim Pension Credit to supplement your low income.
Check if you can claim Pension Credit on the Directgov website
Becoming self-employed for the first time
You may decide to become self-employed for the first time in retirement. To do so you'll need to register with us. You need to do this within three months of becoming self-employed. You can download the registration form or register by calling us on Tel 0845 915 4515.
Go to the form to register as self-employed
Further information on starting up a business
More on becoming self-employed if you are over 50 on the Directgov website
Employing an accountant
You don't have to employ an accountant (agent) if you don't want to, but you may find that for a fee an accountant can help you manage your tax return.
How to authorise an agent to deal with your tax and other affairs
If you're worried about your tax
If you're worried that you're paying too much tax or if you have any other questions about tax and self-employment after State Pension age, you can contact your Tax Office. Or you can call the Newly Self-Employed Helpline on Tel 0845 915 4655. Lines are open from 8.00 am to 5.00 pm Monday to Friday.
More useful links
Tax on company, personal or foreign pensions
Find out how pensions work on the Directgov website
Get help if you have little or no pension - Directgov website
