State pensioners who earn £570 warned they owe tax to HMRC

Due to the planned 2025 Triple Lock boost, state pensioners on the full new state pension are now just £500 or so away from owing tax to HMRC.

State pensioners have been warned they will owe tax to HMRC if they earn £570 or more this year. Due to the planned 2025 Triple Lock boost, state pensioners on the full new state pension are now just £500 or so away from owing tax to HMRC.

That’s because the Personal Allowance is £12,570 for everyone. That means you can earn a maximum of £12,570 before you owe income tax on your earnings to HMRC for every £1 over that amount. Under the triple lock guarantee, the state pension increases every April in line with whichever is the highest of earnings growth in the year from May to July of the previous year, CPI (Consumer Prices Index) inflation in September of the previous year, or 2.5%.

With inflation running at more subdued levels, it is thought that wages will determine next year’s state pension increase. Sir Steve Webb, who is now a partner at consultants LCP (Lane Clark & Peacock) said: “A slightly higher rate of increase is welcome for pensioners, though will be an unwelcome £100 million extra cost for the Chancellor as she prepares her Budget.

READ MORE State pensioners waking up to free £150 payment that's 'automatic'

“The rate of the new state pension will now be close to £12,000 per year, very near to the £12,570 tax-free personal allowance. This is likely to put extra pressure on the Chancellor to take action on tax allowances in the coming years.”

HMRC says: “There are many reasons why someone might need to register for Self Assessment and file a return, including if they: are newly self-employed and have earned gross income over £1,000; earned below £1,000 and wish to pay Class 2 National Insurance Contributions voluntarily to protect their entitlement to State Pension and certain benefits; are a new partner in a business partnership; or have received any untaxed income over £2,500.”

Sir Steve added that living costs will still eat into rising pensions. He said: “Even a slightly improved pension rise will however leave many pensioners out of pocket in real terms overall next April. More than half of next year’s increase will simply be keeping pace with inflation. Taking account of inflation and the loss of winter fuel payments, older pensioners who lose winter fuel payments at the £300 rate will be worse off overall.”