Whilst not everything about getting old may be good, at least the Government gives away a few tax goodies to pensioners. One of the perks is the additional personal allowance that you are entitled to if you are born before 6 April 1938. Unfortunately the size of this perk isn’t that big! Your tax free personal allowance is £10,660 (in the 2015/16 tax year), £60 more than if you’re a youngster.
However, if your adjusted net income is over £27,700 your additional allowance goes down by £1 for every £2 that you breach the £27,700 threshold. It will only reduce to the standard level of £10,600 though assuming that your adjusted net income does not exceed £100,000.
If you are married or in a civil partnership and were born before 6 April 1935, then you are entitled to married couples allowance which for the current tax year can reduce your tax bill by between £322 and £835.50.
As we have mentioned in previous articles, one of the most common misconceptions is that your state pension isn’t taxable when in fact it is. However, the following state benefits do enjoy tax fee status :
- Pension credit
- Winter fuel payments and Christmas bonus
- Free TV licence for the over 75’s
- War Widow’s pension
We are taxable on our income throughout our lifetime regardless of our age but national insurance is different as your age does have a bearing. Once you reach state pension age you no longer pay national insurance (unless you are self-employed and paying class 4 national insurance).
If you are about to reach pensionable age, the new state pension commences on 6 April 2016 and is relevant for men born on or after 6 April 1951, and women born on or after 6 April 1953. The new full rate is £155.65 is per week and is dependent upon your national insurance contribution record. There are online tools available where you can check how much National Insurance you’ve paid and your current pension entitlement: https://www.gov.uk/check-state-pension
Also coming in this April is the new tax free Personal Savings Allowance. Although this is available to everybody, regardless of their age, it is pensioners who are most commonly associated with having savings and hence will benefit from this new allowance. From April 2016 you will not have to pay tax on the first £1,000 (or £500 for higher rate taxpayers) of interest you earn on your savings. From April 2016 banks and building societies will stop automatically taking 20% tax from your interest earned.
It’s often a confusing area, so if you need any help, don’t hesitate to contact us.