Some pensioners ‘may have to set money aside for unexpected tax bills’

dailyrecord.co.uk:

Some pensioners could have to start setting money aside for out-of-the-blue tax bills, a consultancy firm is warning.Frozen income tax thresholds, alongside bumper state pension rises, may push more pensioners into paying tax.Consultants LCP (Lane Clark & Peacock) warned that growing numbers of pensioners could be pushed over the tax threshold based purely on a state pension, adding that there is no automatic way of collecting the tax that they owe, because state pensions are paid in full, before the deduction of tax.In such cases, HM Revenue and Customs (HMRC) could operate a system known as “simple assessment”.Under “simple assessment”, the Department for Work and Pensions (DWP) would notify HMRC at the end of a tax year how much state pension people have received.If this takes someone over the income tax threshold, there would be a tax bill to be paid.HMRC may write to the pensioner after the end of the tax year telling them that they have not paid the tax due on their state pension and requiring them to make a payment before January 31 the following year, LCP said.It warned that pensioners could have received – and spent – all of their pension during one financial year only to receive a tax bill on that pension the following year.For pensioners who have a state pension and a private pension, the state will collect any tax due through the code applied to the private pension.The income tax threshold has been frozen at £12,570 since 2021/22.This could mean pensioners receiving over £242 per week would owe some income tax.LCP said that online statistics from DWP indicate that, as at November 2020, over 2.3 million pensioners had a state pension of £195 per week or more, and taking account of state pension increases since