In a new and exclusive Q&A, money expert Jasmine Birtles answers your pensions and retirement questions. Got a query? Email money@gbnews.uk.
Question: “My state pension takes me over the basic tax threshold by around £1 per week. Am I now expected to complete a self assessment tax return?”
Jasmine replies: What a great question and how mad that you should just be in the tax bracket now!
It could be easy to think: “Ignore it – the tax office won’t care about a few pence of tax being missed”. But of course that’s just asking for trouble!
In the UK, you generally don’t need to complete a self-assessment tax return if your only income is your state pension and it only pushes you slightly over the personal allowance threshold (£12,570 for 2024/2025).
However, it can get a bit more complicated in some circumstances. In fact there are two answers to your question, depending on your situation.
Some people will need to complete a self-assessment tax return if they have to pay tax on their pensions
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Independent financial advisor David Braithwaite from Citrus Financial explains the first situation: “If the only income you have is from the state pension then it’s quite straightforward, thankfully you aren’t expected to complete a self-assessment tax return, you can call HMRC and explain to them the position and they can make the adjustments.”
Helen Morrissey from investment platform Hargreaves Lansdown adds: “If the state pension is your only income and you receive an amount that tips you into income tax paying territory then you should get what is called a simple assessment letter from HMRC.
“This is for people with straightforward tax affairs and means they don’t have to fill in a self assessment tax return.
“The letter will tell you how much you owe and will give you a 14-character payment reference number that you need to use when paying.
Have you got a pensions or retirement question for Jasmine? Email money@gbnews.uk.
“You can pay using a debit card or payment through your online bank. You cannot use a personal credit card to pay, but you can send a cheque or do a bank transfer.”
You can find more information about that on the Government website, Gov.uk.
However, if there is other income such as pensions already in payment, then again after a call to HMRC they will arrange to adjust the tax coding of the other pensions to take the small amount of extra tax now due through that route by taxing the other pensions’ slightly more to collect the additional tax due.
Becky O’Connor from PensionBee adds: “If you’re employed or you have income from another pension in addition to the state pension, HMRC will ask your employer and/or pension provider to apply a suitable tax code.
“This is to compensate for the fact that tax hasn’t been deducted from your state pension. Your employer and/or pension provider will usually pay this to HMRC on your behalf.
“If you’re self-employed and getting your state pension, or you have other income – such as from renting a property or from savings, investments and dividends – you’ll likely need to fill in a self-assessment tax return for the relevant period.”
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As with so many pension and tax-related issues, ultimately it’s a good idea to speak to HMRC directly if you can (find contact details here) or a good accountant for personalised advice based on your specific circumstances.
They can provide guidance on whether you need to complete a self-assessment tax return and help make sure that you’re doing what you should with your tax.
Jasmine Birtles is a personal finance expert, TV and radio presenter and author of 38 books.
Her website, MoneyMagpie.com, covers all aspects of personal finance from money-saving and money-making ideas to investment and pensions information. She is a keynote speaker at conferences around the world.
