Martin Lewis Warns State Pensioners: Perk Now Faces Taxation

Martin Lewis has issued a personal tax allowance alert to state pensioners in a new update. The BBC and ITV star has spoken out over the frozen personal tax allowance threshold and told pensioners they could end up paying tax if they go over it.

Adrian Chiles, who co-hosts BBC Sounds, mentioned: "Debbie wants to know whether she can receive her state pension and keep working at the same time." Martin answered affirmatively. Chiles, a supporter of West Bromwich Albion, then added: "Bernice wonders if a private pension is taxable?"

52-year-old ITV star and Money Saving Expert founder Martin said: “Private and state pension income is taxable. The only exception is when you take a private pension 25 per cent of it can be taken as a tax-free lump sum.

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HMRC encourages all parents with an income below £200,000 to apply for the complimentary £2,000 benefit.

How you achieve that 25 percent is complex. A lot of individuals find this confusing. They argue, 'We're heading towards a scenario where state pensions might become taxable.' It's not accurate to say these 'will be taxed.' The right question is whether they 'are taxable' or 'aren’t taxable.'

State pension income is subject to taxation. However, most individuals receive a £12,570 personal allowance which allows them to earn without paying taxes, and this threshold does not apply to state pensions specifically. Yet, when you combine your state pension with additional sources of income, everything gets totaled up. Any amount exceeding £12,570 becomes liable for taxation.

So, as long as I can recall, the state pension has always been subject to taxation, and apart from the 25 per cent lump sum, pension income is also taxable. The problem arises for those whose total earnings do not exceed their tax-free allowance.

You have the option to continue working, either for pay or voluntarily, whilst receiving your State Pension. The earnings from this work won’t impact your State Pension; however, they could influence your eligibility for other benefits like Pension Credit, Housing Benefit, and Council Tax Reduction.

If you lack sufficient qualifying years to receive the complete State Pension, you might be able to fill in gaps within your National Insurance record by making voluntary payments.

There is a deadline for completing this task.

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