Tax on state pension: Are you eligible for extra payment? Additional amount is tax-free

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Income Tax must be paid to HM Revenue and Customs (HMRC) on taxable income which is greater than a person’s tax-free allowance. Some types of income will be subject to the tax, while others are tax-free. For instance, the state pension is taxable. However, Income Tax is not paid on the means-tested additional payment for eligible pensioners, known as Pension Credit.

Pension Credit is an income-related benefit which is made up of two parts.

These are Guarantee Credit and Savings Credit.

The former is a top-up amount, meaning the payment tops up a person’s weekly income if it’s below £167.25 for a single person, or £255.25 for couples.

The latter is an additional payment for a person who has saved some money towards their retirement, such as a pension – however one may not be eligible for Savings Credit if they reached state pension age on or after April 6, 2016.

Neither types of Pension Credit are subject to Income Tax.

Earlier this year, the Department for Work and Pensions (DWP) revealed that there was a 60 per cent take-up of Pension Credit.

The DWP also said that, in June, more than a million people entitled to claim the benefit, were not yet doing so.

The BBC has announced that it will not be funding free TV licences for over 75s once the government funded scheme comes to an end in June 2020.

This means that when the new scheme begins on June 1, 2020, not all over 75s will be eligible for a free TV licence.

That said, those who are aged 75 or older and who receive Pension Credit, will still be able to get a free TV licence – paid for by the BBC.

The DWP has said that the easiest way to apply for Pension Credit is by telephone.

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