State Pension payment increase next week could see more people in retirement pay tax

dailyrecord.co.uk:

Basic and New State Pension payments will increase next week by 10.1 per cent for some 12.6 million older people across the country, including around one million living in Scotland.The uprating means that those on the full New State Pension will see payments increase from £185.15 to up to £203.85 each week and those on the Basic State Pension will see weekly payments rise from £141.85 to up to £156.20.

It's important to be aware that the amount someone receives depends on the amount of National Insurance (NI) contributions they have made.However, while the increase will help offset the ongoing cost of living crisis, it also means more older people may have to pay tax on their income.

This is because someone with 35 years’ worth of NI contributions, on the Full New State Pension will receive £815.40 every four-week pay period, giving them an annual income of £10,600.20 - which leaves them just £1,969.80 of their annual Personal Allowance of £12,570.Those in receipt of the Basic State Pension will see their payment rise to £156.20, which may be topped up further by the Additional State Pension.However, new analysis from Standard Life, part of Phoenix Group highlights that increases will also take them closer to the tax-free Personal Allowance limit.The freeing of the Personal Allowance at £12,570 since 2021/2022 means that the State Pension payment has grown from 74 per cent of the allowance to 84 per cent for 2023/24, meaning pensioners will need just £1,969.80 of income before they start paying income tax.Dean Butler, Managing Director for Customer at Standard Life, said: “Pensioners are set to see a healthy boost to their incomes in a few days’ time as the State Pension amount passes £10,000 for many for the first time.